FAANG Worries On Wall Street
So on the face of it, the news flow overnight was bullish, a stronger US third quarter GD second estimate of 3.3%, rising optimism on President Trump’s tax cut package and solid optimism among investors, or so it seemed until sharp falls in the collection tech tech giants known as the FAANG stocks whacked the Nasdaq.
Gold and oil lost ground, iron ore rose to within sight of $US68 a tonne overnight but copper again sold off in London and in New York. The Aussie dollar was trading around 75.75 in early Asian trading Thursday.
So while the Dow ended higher, the Nasdaq saw a big slide. That was after the Nasdaq, Dow and S&P 500 all ended Tuesday’s session at record highs.
In fact the Dow notched an intraday record on Wednesday and ended at a high, up 95 points or 0.4% at 23,932.
But a selloff in megacap technology shares, such as Facebook, Apple, and Amazon weighed on the S&P 500 and the Nasdaq Composite.
The S&P 500 ended down 2 points as the sell off in the huge techs hit hard. That saw the Nasdaq down 89 points, or 1.3%, to 6,823 while the closely watched Philly Semiconductor Index sank 3.8%, its worst daily drop since June.
The three equity indexes have gained between 17% and 28% for the year, boosted by an expanding US economy, rising corporate profits, weak expected returns for other assets and growing confidence that the Trump administration will deliver on tax cuts and other business-friendly policies.
But the largest driver has been the outperformance of the big cap tech stocks, the FAANG Group - Facebook, Amazon Apple, Netflix and Google (Alphabet) - that have seen Wall Street continue on its record smashing ways.
Some analysts wonder whether the sell off overnight (Nasdaq was down well over 100 points at one stage) is a blip or an early signal of investor worries about valuations.
Oil futures ended lower for a third-consecutive session, as growing uncertainty over the outcome of tonight’s OPEC meeting outweighed support from US data revealing a decline in domestic crude stockpiles for a second week in a row.
January West Texas Intermediate crude fell 69 cents, or 1.2%, to settle at $US57.30 a barrel in New York. In Europe January Brent the front-month contract which expires at Thursday’s settlement, fell 50 cents, or 0.8%, to end at $US63.11 a barrel.
Analysts say the emergence of a change of heart from Russia has injected a note of confusion into the belief that tonight's OPEC and other producers meeting in Vienna will extend the production cap past the end of next March to the end of 2018.
According to US media reports the Russians want a long extension, but to be rolled over every three months to allow for the producers the chance to take advantage of higher prices by expanding output (that would be self defeating and see prices fall).
The Financial Times reported overnight that Kuwait’s oil minister said Wednesday that the Joint Ministerial Monitoring Committee of OPEC and non-OPEC countries has recommended that producers extend the cuts by six or nine months.
A three or six month extension would likely see oil prices continue to weaken. An extension to the end of 2018, as it seemed would happen a month ago, would help prices continue rising.
Iron ore prices inched closer to $68 per tonne on Wednesday with the Metal Bulletin’s 62% Fe Iron Ore Index up 16 cents to $US67.92 a tonne.
In New York, Comex February gold fell $13, or 1%, to settle at $US1,286.20 an ounce.
Elsewhere on Comex, March silver which is the most-active contract, fell by 2.1% to $US16.561 an ounce while March copper fell 1% to $3.069 a pound (and is down more than 4% in the past few days).
The ASX 200 overnight futures market was showing a 12 point loss for the main index ahead of the resumption of trading later today on the last day of November.
Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.
At the AFR he was a finance writer, Finance Editor, News Editor and Chief of Staff. At the Nine Network he was supervising producer of Business Sunday for more than 16 years. He has also written for other online and analogue print publications here and overseas.