Nasdaq Futures Slip as Chip Stocks Extend Slide, U.S. Jobs Report in Focus

September Nasdaq 100 E-Mini futures (NQU26) are down -0.30% this morning, pointing to further losses after semiconductor stocks led Wall Street lower in the previous session.

Chip and AI infrastructure stocks were among the biggest losers in pre-market trading. Sandisk (SNDK) was down over -3%, while Micron Technology (MU) and Marvell Technology (MRVL) were down more than -2%. Sentiment remained dampened by Meta Platforms’ plan to sell computing power, which fueled concerns about excess capacity. Also hurting chipmakers was news that Apple is in talks to buy chips from two Chinese manufacturers, which sparked concerns about intensifying competition.

The price of WTI crude fell over -1% on Thursday on signs of progress in indirect U.S.-Iran negotiations and as flows through the Strait of Hormuz climbed. A spokesperson for Qatar’s Foreign Ministry said in a post on X that Qatari and Pakistani mediators had concluded separate meetings with U.S. and Iranian negotiators in Doha, with positive progress made on issues related to the memorandum of understanding. Meanwhile, the United Arab Emirates last month restored its oil exports to pre-war levels of more than 3.9 million barrels a day, while a U.S. official estimated that oil flows through the Strait of Hormuz have now exceeded 10 million barrels a day.

Attention now turns to the release of the key U.S. jobs report, which will provide fresh clues on the path for interest rates.

In yesterday’s trading session, Wall Street’s three main equity benchmarks ended in the red. Chip and AI infrastructure stocks sank, with KLA Corp. (KLAC) tumbling over -11% and SanDisk (SNDK) plunging more than -10%. Also, Nebius Group N.V. (NBIS) slumped over -17% to lead losers in the Nasdaq 100 and CoreWeave (CRWV) slid more than -13% on a report that Meta Platforms was building a cloud infrastructure business. In addition, Caterpillar (CAT) fell over -6% and was the top percentage loser on the Dow after Michael Burry revealed in a Substack post that he had initiated a short position in the stock for the first time. On the bullish side, Meta Platforms (META) surged over +8% after Bloomberg reported that the Facebook parent was developing plans for a cloud infrastructure business that would sell access to AI computing power and models.

The ADP National Employment report released on Wednesday showed that U.S. private nonfarm payrolls rose by 98K in June, weaker than expectations of 118K. Also, the U.S. ISM manufacturing index fell to 53.3 in June, weaker than expectations of 53.8, while the S&P Global manufacturing PMI was revised lower to 53.9, weaker than expectations of no change at 55.7. At the same time, U.S. May construction spending rose +0.1% m/m, in line with expectations.

Fed Chairman Kevin Warsh said on Wednesday at the European Central Bank’s forum in Sintra, Portugal, that inflation risks have come down in recent weeks. “Expectations of inflation over the first four weeks of this period have come down; inflation risks have come down,” Warsh said. He reinforced a message from his first press conference as Fed chairman last month that the central bank will deliver price stability. Warsh also reiterated that he would not provide “forward guidance” regarding upcoming interest-rate policy.

“At a minimum, his comments provided no fuel for speculation on a near-term July rate hike, and in our view suggest the new Fed chair – while keeping all options open meeting by meeting – does not currently see cause for an immediate hike,” said Krishna Guha at Evercore.

Meanwhile, U.S. rate futures have priced in a 70.6% probability of no rate change and a 29.4% chance of a 25 basis point rate hike at July’s monetary policy meeting.

Today, all eyes are focused on the U.S. Nonfarm Payrolls report, which is set to be released in a couple of hours. Economists, on average, forecast that June nonfarm payrolls will come in at 114K, compared to the May figure of 172K. That would mark the strongest six-month period for hiring since mid-2024.

Investors will also focus on the U.S. Unemployment Rate. Economists forecast that the jobless rate will remain steady at 4.3% in June.

“A number a bit above 100,000 and stability in the unemployment rate are the best-case scenario for this market, as it reinforces solid economic growth, but it won’t make rate hikes more likely,” said Tom Essaye at The Sevens Report.

U.S. Average Hourly Earnings data will be released today. Economists expect average hourly earnings to rise +0.3% m/m and +3.5% y/y in June, compared to +0.3% m/m and +3.4% y/y in May.

U.S. Factory Orders data will come in today. Economists project factory orders to drop -1.7% m/m in May, following a +4.8% m/m climb in April.

U.S. Initial Jobless Claims data will be released today as well. Economists expect this figure to be 219K, compared to last week’s number of 215K.

In the bond market, the yield on the benchmark 10-year U.S. Treasury note is at 4.50%, up +0.29%.

On Friday, U.S. stock and bond markets will be closed in observance of Independence Day.

The Euro Stoxx 50 Index is up +0.31% this morning as gains in defensive stocks offset weakness in AI-related stocks, while investors look ahead to the key U.S. jobs report. Consumer-oriented stocks outperformed on Thursday. At the same time, technology stocks sank, tracking losses in their Asian and U.S. peers. Europe’s relatively smaller exposure to technology stocks helped limit their drag on the benchmark index. Data from Eurostat released on Thursday showed that the Eurozone’s unemployment rate held at a record low in May, underscoring the labor market’s resilience despite economic disruptions linked to the conflict in the Middle East. Separately, data showed that Switzerland’s annual inflation rate eased in June, marking the first decline since higher energy prices drove inflation higher following the start of the Middle East conflict. Meanwhile, oil prices fell on Thursday on signs of progress in indirect U.S.-Iran negotiations and as flows through the Strait of Hormuz increased, supporting investor sentiment. Investor focus now turns to the U.S. monthly payroll report. In corporate news, Sodexo SA (SW.P.DX) climbed over +7% after the French food services company reported strong FQ3 revenue and raised its full-year organic revenue growth guidance.

Switzerland’s CPI and Eurozone’s Unemployment Rate were released today.

Switzerland’s June CPI was unchanged m/m and rose +0.5% y/y, compared to expectations of +0.1% m/m and +0.5% y/y.

Eurozone’s May Unemployment Rate was 6.2%, stronger than expectations of 6.3%.

Asian stock markets today closed in the red. China’s Shanghai Composite Index (SHCOMP) closed down -2.03%, and Japan’s Nikkei 225 Stock Index (NIK) closed down -2.47%.

China’s Shanghai Composite Index closed sharply lower and hit a 3-week low today, weighed down by a broad-based selloff in the tech sector. The STAR 50 Index, a gauge of Chinese tech stocks, tanked 7.7% in its biggest decline since the Liberation Day rout. Semiconductor stocks were hit particularly hard, tracking overnight tech losses on Wall Street after Meta Platforms’ plans to develop a business selling access to AI computing power fueled concerns about overcapacity. Sentiment was also dampened by a Bloomberg report that Apple was in discussions to purchase chips from two Chinese semiconductor makers on a Pentagon blacklist, a move that could draw scrutiny from U.S. policymakers amid heightened tensions between Washington and Beijing over advanced technology. Chip production gear maker Naura Technology and chipmaker Giga Device tumbled -10%. “Technology stocks cooled sharply as markets underwent a period of rotation. However, the shift is probably short-lived, with the current pullback offering a favorable entry point for medium- to long-term positioning,” according to Huatai Futures analysts. In corporate news, China Resources New Energy shares tripled in the company’s Shenzhen trading debut after the wind and solar power firm raised 24.5 billion yuan ($3.61 billion) in Asia’s largest IPO so far this year. Investors are looking ahead to this month’s Politburo meeting to see whether China unveils policy support for an uneven economic recovery.

Japan’s Nikkei 225 Stock Index closed sharply lower today, snapping a three-session winning streak as the biggest beneficiaries of the global AI boom came under pressure amid concerns over the sustainability of AI infrastructure spending. Chip and other AI-related stocks tumbled on Thursday, tracking an overnight slump in their U.S. peers, which were weighed down by a Bloomberg report that Meta Platforms is building a cloud business to sell excess computing power to external customers. The report sparked concerns that Meta may have overbuilt its capacity. Also dampening sentiment, a separate Bloomberg report said that Apple was in discussions to buy chips from two Chinese semiconductor makers. Memory chipmaker Kioxia Holdings cratered over -13% and chip-testing equipment maker Advantest plunged about -10%. “AI-related stocks have moved up a lot, and expectations are high. So we get periodic selloffs and any bad news triggers profit-taking,” said Joshua Crabb at Robeco. Meanwhile, foreign investors sold a net 1.82 trillion yen ($11.20 billion) worth of Japanese stocks in the week ended June 27th, marking their largest weekly net sales since March 28th, according to Ministry of Finance data. Elsewhere, the yen surged suddenly against the dollar on Thursday, with traders remaining alert to the prospect of intervention by Japanese authorities to support the stubbornly weak currency. The Nikkei Volatility Index, which takes into account the implied volatility of Nikkei 225 options, closed down -26.76% to 24.74.

Pre-Market U.S. Stock Movers

Chip and AI infrastructure stocks slid in pre-market trading, with Sandisk (SNDK) falling over -3% and Marvell Technology (MRVL) dropping more than -2%.

Alphabet (GOOGL) fell about -0.7% in pre-market trading after the company’s Google lost its lengthy battle to overturn a roughly $4.69 billion European Union fine over requirements imposed on device manufacturers using the tech giant’s Android operating system.

Trip.com (TCOM) dropped more than -1% in pre-market trading after China Renaissance downgraded the stock to Hold from Buy.

Software stocks advanced in pre-market trading. Palantir Technologies (PLTR) was up over +3% after DA Davidson upgraded the stock to Buy from Neutral with a price target of $175. Also, ServiceNow (NOW) and Workday (WDAY) were up more than +1%.

Most members of the Magnificent Seven stocks edged higher in pre-market trading, with Tesla (TSLA) rising +0.7% and Microsoft (MSFT) gaining +0.6%.

You can see more pre-market stock movers here

Today’s U.S. Earnings Spotlight: Thursday - July 2nd

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