Macro update
Wall Street selloff deepens on AI fears:
United States (US) indices fell sharply, with the Dow Jones down 1.34%, the S&P 500 losing 1.57% and the Nasdaq 100 sliding 2.04% as investors accelerated their rotation out of technology and other risk-sensitive sectors.
Cisco triggers a fresh tech rout:
Cisco plunged 12.3% after missing on adjusted gross margin, its worst one-day drop since 2022, weighing on mega caps including Apple, NVIDIA, Broadcom and Amazon and reigniting concerns over the returns on heavy AI-driven spending.
Transport and PC stocks hit by disruption worries:
The Dow transports index slid 4% on fears around artificial intelligence (AI)-led automation, while HP and Dell fell after Lenovo warned of shipment pressure linked to memory-chip shortages.
Defensive rotation and bond rally:
Investors shifted into utilities, consumer staples and real estate, while US Treasury yields dropped sharply, with the 10-year yield down 7bp as strong demand at a 30-year auction supported bonds.
Asia pulls back from record levels:
MSCI’s Asia-Pacific index fell 1.1%, Japan’s Nikkei 225 dropped 1.3% and Hong Kong’s Hang Seng slid 2.1%, tracking Wall Street’s tech-led declines, while US futures edged lower ahead of the European open.
Attention turns to US inflation data:
Weekly jobless claims fell by less than expected and markets now await January consumer price index (CPI), with core prices forecast to rise 0.3% month-on-month (MoM) and annual core inflation seen easing to 2.5%, as traders price around 60bp of Federal Reserve (Fed) cuts this year.
S&P 500 once again under pressure
The recent S&P 500 rally ran out of steam marginally below its 7002 late January record high and rapidly slid back towards support at the early January 6824 low.
A fall through this level seems to be on the cards now with the November to February support line and 20 January-to-early February lows at 6807 – 6780 being on the cards.
Were this support zone to give way, the December trough at 6720 would be in sight.
Resistance may now be spotted around the 29 January low at 6871.
Short-term outlook:
Bearish while below the late December peak at 6946.
Medium-term outlook:
Neutral with a bullish stance while above the 6721 mid-December low.
