Asia’s stocks increased following Wall Street’s positive close, propelled by a shift away from megacap tech and into economically sensitive stocks, such as smaller businesses.
Australia’s and Japan’s stocks increased. As investors consider support measures for the nation’s second-largest economy, an index of Chinese companies listed in the US increased by about 1% on Wednesday, suggesting the country’s shares may rebound following two days of falls.
The S&P 500 advanced 0.5% on Wednesday, and gains were seen in Asian futures as well. The small-cap Russell 2000 index increased to its highest point in nearly three years, whereas the Nasdaq 100 only increased by 0.1%. Against the trend of subdued tech results, Nvidia Corp. surged 3.1% to support the Magnificent Seven group of mega-cap tech stocks.
The actions point to a movement away from the biggest IT companies in the world, whose stock prices have surged due to the artificial intelligence boom, and towards other stocks that do well during periods of economic expansion.
“Investors may be looking to rotate away from large technology companies, which are widely owned and may have fewer clear catalysts going forward,” said David Russell at TradeStation. “With the election coming and the economy returning to balance, the long-awaited rotation away from megacaps to everything else could finally be at hand.”
Chinese President Xi Jinping has called on government officials to make every effort in the final quarter to help the country meet its annual growth target of around 5%. However, after a series of press conferences this month in which policymakers offered no details of fresh stimulus, fears are now mounting that efforts may not be enough to revive growth. The next key event is a press briefing by the housing minister on Thursday.
Bond yields in Australia and New Zealand also decreased, following slight shifts in the Treasury yield curve. The dollar index held close to its highest levels since early August, while the US 10-year yield stayed stable at little over 4%. Following its decline versus the US dollar earlier in the day, the yen saw minimal movement early on Thursday.
Following ASML Holding NV’s unexpectedly gloomy order numbers and its earlier-week reduction of its 2025 revenue prediction, investors will be eagerly monitoring Taiwan Semiconductor Manufacturing Co.’s earnings on Thursday for any indications of a slowing chip demand.
US Earnings
Additionally, traders kept sifting through a flood of US company earnings. Morgan Stanley saw a 6.5% increase in profits for the third quarter as traders and bankers reported higher-than-expected income, following the lead of their Wall Street competitors. As profits exceeded expectations, United Airlines Holdings Inc. saw a 12% increase.
This year, the S&P 500 has already established 46 closing records, and the trading desk at Goldman Sachs Group Inc. believes that the current rise is likely to continue throughout the latter half of 2024.
According to Scott Rubner, a tactical specialist and managing director for global markets at the bank, the US stock benchmark could end the year “well north of 6,000.” His computations using data extending back to 1928 indicate that the historical median of S&P 500 returns during the period of October 15 to December 31 is 5.17%. Election years had considerably higher median returns—just over 7%—which suggests a 6,270 year-end level.
“The equity market selloff is cancelled, and a year-end rally is starting to resonate with clients shifting from hedging from the left-tail to the right-tail as institutional investors are getting forced into the market right now,” Rubner wrote in a note to clients Tuesday.
West Texas Intermediate saw a rise in commodities on Wednesday after declining for the fourth straight day. After two sessions of advances, gold remained stable. After climbing 1.7% on Wednesday to reach its highest level since July, bitcoin saw little change on Thursday.
