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What you need to know today
Tech sell-off
Major U.S. indexes fell Monday, dragged down by a sell-off in technology stocks. Stock futures, however, inched up. European markets traded mixed. The pan-European Stoxx 600 dipped 0.1%, continuing its five consecutive days of falling last week, even as S&P Global Ratings doubled its 2023 gross domestic product forecast for the euro zone from 0.3% to 0.6%.
Leaders speak
In his first televised address since the Wagner Group marched on Moscow, Russian President Vladimir Putin said organizers of the armed mutiny will be “brought to justice” and that his military would have crushed the rebellion. Separately, U.S. President Joe Biden said the U.S. “had nothing to do with [the events], this was part of a struggle within the Russian system.”
A ‘mortgage catastrophe’
The U.K. is facing a “mortgage catastrophe,” warned the country’s shadow finance minister. The Bank of England’s 50 basis points rate hike last week will push mortgages up. That, in turn, will bring the number of households without savings by the end of the year to 7.8 million, or 30% of households nationwide, estimated the National Institute of Economic and Social Research, an independent think tank.
Apple’s new shoots
Apple’s new Vision Pro headset aside, the tech company is reportedly planning to refresh all its major products in the next 12 months. On track to be released are a second version of the Apple Watch Ultra, a new 30-inch iMac (which would be the company’s largest all-in-one desktop to date), iPad Pros with OLED screens, MacBook Pros equipped with Apple’s new M3 chip, among other products.
[PRO] Imminent drop in the S&P?
Mile Wilson, Morgan Stanley’s chief U.S. equity strategist, thinks the “risks for a major correction [in the stock market] have rarely been higher” because of four factors that will weigh down on markets. Wilson, who predicted the fall in markets last year, thinks the S&P 500 will drop to 3,900 in the fourth quarter. That’s around 10% lower from its Monday close, among the most bearish outlooks on Wall Street.
The bottom line
The attempted insurrection in Russia across the weekend dominated headlines, but it didn’t seem to occupy investors’ minds. Instead, “macro factors are likely to remain the main drivers of risk assets,” wrote Barclays’ Global Chairman of Research Ajay Rajadhyaksha in a Monday note.
Indeed, tech stocks slumped across the board as investor enthusiasm over artificial intelligence fizzled out and was replaced by a more clear-eyed view of today’s economic conditions.
Alphabet fell 3.27% after UBS downgraded the company, citing stiff competition in the AI sector. Nvidia and Metafell in sympathy, losing more than 3% each. But that wasn’t as bad as Tesla’s plunge of 6.06% after Goldman Sachs downgraded the electric car maker because of a “difficult pricing environment for new vehicles.”
The sell-off in tech put pressure on the Nasdaq Composite, which sank 1.16%. The S&P 500 fell 0.45% while the Dow Jones Industrial Average dipped 0.04%.
There might be more pain to come. The tech rally is “running out of steam,” according to Berenberg, a German bank. Tech, as a future-oriented sector, needs lower interest rates if it wants to continue rising.
But with the Federal Reserve emphasizing it’d keep rates high for now, lower rates would imply “a sharp economic slowdown,” Jonathan Stubbs, equity strategist at Berenberg, wrote. Stubbs mentioned that such a scenario would “be to tech’s disadvantage,” but, really, no one would benefit from it.
Nonetheless, with just a few days left before June ends, the three major indexes are poised to finish the second quarter higher. The recession is still months away, it seems — as it’s been for the past year. Fingers crossed we manage to elude it for so long that it gets tired of catching up with us.