Markets Overview
- ASX SPI 200 futures little changed at 8,619.00
- S&P 500 down 0.3% to 7,386.65
- Dow Average up 0.2% to 50,872.11
- Aussie down 0.3% to 0.7027 per US$
- US 10-year yield fell 4.8bps to 4.5145%
- Australia 3-year bond yield fell 1 bp to 4.55%
- Australia 10-year bond yield rose 1.1 bps to 4.92%
- Gold spot down 1.6% to $4,260.35
- Brent futures down 2.5% to $91.86/bbl
Economic Events
- 11:00: (AU) Australia to Sell A$1 Billion 4.75% 2037 Bonds on June 10
A rotation that has seen investors bail from richly priced technology names in favor of more economically sensitive industries resumed, with stocks trimming losses in the final stretch of trading.
While weakness in the S&P 500’s most-influential group squelched a market rebound, the benchmark almost erased a 2.3% slide as most of its shares rose. Chipmakers, which had powered the recovery from war-driven lows, swung violently. The Nasdaq 100 lost 1.1%. Oil pared its drop as President Donald Trump said the US must respond to Iran’s attack on an American helicopter, dimming hopes for a quick resolution to their conflict.
The renewed volatility in semiconductor giants came after a surge that had put the sector on track for its best year since 1999. While the industry’s long-term outlook remains tied to a flood of spending on artificial intelligence, investors are increasingly questioning whether valuations can keep pace after one of the market’s most-powerful advances.
“As much as we love to see tech’s leadership, it would be constructive to see this rally broaden out to other sectors,” said Bret Kenwell at eToro. “When leadership is concentrated in one corner of tech, the market’s foundation gets a little wobblier.”
The recent whipsawing in tech is giving investors a taste of how quickly the tide may turn for the biggest winners should sentiment flip. While pinpointing the volatility’s cause has been difficult, it’s occurring in high-valuation stocks ahead of massive new equity issuance, including SpaceX’s expected IPO pricing this week.
A flood of shares from companies seeking capital to fund AI ambitions is raising questions about whether demand will be sufficient to absorb the issuance and what the implications will be for broader valuations.
A deal of SpaceX’s size can be bullish over the long run if it reflects deep demand for innovation and new public-market opportunities, according to Anthony Saglimbene at Ameriprise. However, in the near term, large offerings also raise a basic funding question.
“Where does the money come from?” he said. “Some demand may come from cash. Some may come from new retail participation. But institutional participation in a deal of this scale can also require trimming existing winners, particularly in areas where investors already have large gains.”
Upcoming megacap IPOs are “adrenaline” for a bull market hitting its prime, but they do not signal euphoria yet, according to Robert Edwards at Edwards Asset Management.
“We’re at the start of a frenzied buying spree worth riding,” he noted. “True euphoria hits when everyone’s flipping the next IPO ‘wunderkind’ and bankers are rushing questionable, pre-revenue deals that suck up cash. We’re still in the speculative phase, and the run toward euphoria is one you don’t want to miss.”
