Market Overview
US equities closed a mixed session, with the Dow Jones Industrial Average posting solid gains driven by strong corporate earnings, while the Nasdaq Composite edged lower amid persistent concerns over the sustainability of the artificial intelligence (AI) trade. Oil prices experienced significant volatility throughout the session, initially dipping on hopes of US-Iran diplomacy before surging after Iran asserted its “sovereignty” over the Strait of Hormuz, reigniting crude supply disruption fears. For APAC investors, who are preparing for Wednesday’s session, the ongoing AI narrative, fluctuating commodity prices, and declining long-term US Treasury yields — signalling potential Federal Reserve rate stability — will be key considerations. Australian shares are poised to open higher on Wednesday, with ASX 200 futures pointing up 35 points or 0.4 per cent to 8869, near 6am AEDT, according to AFR.
Markets
On Tuesday, the Dow Jones Industrial Average (^DJI) advanced 1.02% to close at 52,495.88. The S&P 500 (^GSPC) also finished higher, rising 0.28% to 7,712.57. In contrast, the technology-heavy Nasdaq Composite (^IXIC) edged down 0.02% to 26,424.82, reflecting caution around the tech sector.
In commodity markets, Brent Crude (BZ=F) was down 0.57% at 108.93, while WTI Crude (CL=F) fell more significantly, dropping 5.48% to 97.98. Gold (GC=F) declined 0.48% to 4,140.30.
The Australian Dollar (AUDUSD=X) gained 0.48% against the US dollar, reaching 0.7006. US Treasury yields moved lower, with the US 10-Year Treasury (^TNX) declining 1.90 basis points to 5.117%, and the US 30-Year Treasury (^TYX) falling 4.70 basis points to 5.425%.
What Drove Markets
AI Trade Sustainability Under Pressure: Investor concerns about the longevity of the artificial intelligence build-out continue to weigh on market sentiment. This caution was underscored by the disastrous market debut of South Korean neocloud firm Elice, which plunged 32 per cent on its market debut, contributing to declines in the KOSPI and Nikkei indices, as reported by AFR, CNBC, and Investing.com. Further adding to the cautious mood, AI frontier lab Anthropic recorded a substantial $US80 billion first-half loss, according to AFR. Analysts, as cited by CNBC, are anticipating upcoming earnings reports from “hyperscalers” to be the “next major stress test for the AI trade,” with guidance on return on investment (ROI), data center spending, and 2027 capital expenditure expected to be more critical than headline earnings figures. Despite broader concerns, some AI-related stocks in the US, including Western Digital, Seagate Technology, CoreWeave, and Marvell Technology, staged a modest comeback during the session.
Volatile Oil Prices Amid Escalating Geopolitics: Crude oil prices experienced significant intraday volatility driven by developments in the Middle East. Prices initially fell on hopes of diplomatic progress between the US and Iran, following reports by Investing.com and Trading Economics of a “middle ground” plan offered by Qatar and Pakistan. This proposal reportedly involved the release of $6 billion in frozen Iranian funds and Iran’s potential agreement to International Atomic Energy Agency (IAEA) visits to nuclear sites, Investing.com reported. However, oil prices reversed course and surged after Iran’s First Vice President asserted the country’s “sovereignty” over the Strait of Hormuz, intensifying worries over crude supply disruptions in the critical waterway, according to Investing.com. The Strait of Hormuz has been largely shuttered since a joint U.S.-Israeli assault on Iran in late February, with shipping figures only recently indicating signs of recovery, Investing.com added. Further fueling these concerns were claims by Iran’s IRGC that two “non-compliant” oil tankers had been struck in the Strait of Hormuz, and a warning from Iran’s Foreign Ministry of an “equal measure” response to US attacks, as reported by Trading Economics.
US Earnings Bolster Broader Market Sentiment and Fed Expectations: Strong corporate earnings reports provided a boost to US indices. Industrial and safety products producer 3M (MMM) jumped 5.78% following better-than-expected results and raised full-year guidance, contributing significantly to the Dow’s gains. Shares of aerospace and defense company Northrop Grumman also advanced more than 4% after beating earnings estimates, according to CNBC. This broader positive tone in traditional economic sectors helped to partially offset weakness in tech stocks. Concurrently, a decline in long-term US Treasury yields reinforced market expectations that the Federal Reserve will likely refrain from delivering back-to-back rate hikes at its meeting next week, as noted by Trading Economics.
Stocks to Watch
Shares of 3M (MMM) jumped 5.78% after reporting better-than-expected earnings and raising its full-year guidance. Aerospace and defense company Northrop Grumman also advanced more than 4% following its earnings beat, according to CNBC. Among AI-related stocks, Western Digital (WDC) gained 3.44%, Seagate Technology (STX) rose 2.17%, CoreWeave (CRWV) was up 1.65%, and Marvell Technology (MRVL) added 1.40%, staging a modest comeback despite broader sector concerns.
Conversely, South Korean neocloud firm Elice plunged 32 per cent on its market debut, as reported by AFR, contributing to declines in the KOSPI and Nikkei indices. AI frontier lab Anthropic recorded a substantial $US80 billion first-half loss, according to AFR. General Motors slid 6.8% after issuing a disappointing adjusted profit forecast, Investing.com and Trading Economics reported. Equifax stock rose over 11% after topping quarterly adjusted profit estimates and a 32% year-over-year increase in net income, according to Investing.com. Hasbro advanced over 11% as it smashed quarterly adjusted profit expectations, boosted by its Magic: The Gathering franchise, Investing.com noted. Elon Musk’s SpaceX (SPCX), which edged down 0.11%, reported record $US14.6 billion third-quarter revenue, though a Macquarie analyst noted that SpaceX’s outlook on AI will “matter more than the quarter,” AFR reported. Quarterly reports from streaming pioneer Netflix (NFLX), which fell 1.66%, also grabbed attention after the closing bell.