Following a significant selloff of US$2 trillion (approximately US$3.1 trillion), the US stock market witnessed a resurgence as concerns regarding the escalation of the Middle East conflict subsided. This positive sentiment boosted stocks and exerted downward pressure on the prices of gold and oil. ASX futures gained 19 points (0.25%) to reach 7693 as of 6.57 am AEST. On Wall Street, the S&P 500 surged by 0.9%, surpassing the 5,000 mark once again. The Dow Jones Industrial Average rose by 0.7%, and the Nasdaq Composite experienced a 1.1% increase. This upturn was driven by investors’ expectations of strong earnings results from major tech companies.
In a reversal of the previous week’s risk-averse sentiment, spot gold dropped by 2.7% as investors moved away from safe-haven assets, anticipating the largest one-day decline since June 2022. The recent trend has been for investors to adopt cautious positions on Fridays, fearing a potential escalation of conflict in the Middle East over the weekend when markets are closed.
However, concerns about Federal Reserve interest rate cuts and the performance of the chip sector earnings will continue to keep investors alert, according to Kazuo Kamitani, a strategist at Nomura Securities. Artificial intelligence chipmaker Nvidia outperformed the major tech stocks, with a surge of 4.4%. Apple also experienced growth after being named a top pick for 2024 by Bank of America, based on optimism surrounding its upcoming results.
Approximately 180 S&P 500 companies, accounting for over 40% of its market capitalization, are anticipated to release their earnings reports this week. The most significant expectations are focused on the ‘Magnificent Seven’ megacaps, with analysts forecasting a nearly 40% increase in their profits compared to the previous year, according to Bloomberg Intelligence. Microsoft, Google owner Alphabet, Facebook and Instagram parent Meta Platforms, and electric carmaker Tesla are among those scheduled to report earnings this week.
Gold mining stocks experienced their weakest trading session in two months as bullion prices plummeted amid signs of easing geopolitical tensions between Israel and Iran. Newmont Corp suffered a decline of up to 4.2%, with competitors Barrick Gold and Agnico Eagle Mines also facing setbacks. The bearish sentiment surrounding oil on Monday further reinforced the notion of reduced tensions in the Middle East. Crude oil prices declined as traders shifted their focus to fundamental factors, with rising US stockpiles serving as the backdrop. US crude lost 0.35% to reach US$82.85 per barrel, while Brent dropped by 0.1% to US$87.19 per barrel.
