Nasdaq Futures Slip as Rising Yields Hit Chipmakers, U.S. ADP Jobs Report and Broadcom Earnings on Tap

September Nasdaq 100 E-Mini futures (NQU26) are down -0.52% this morning as rising bond yields sparked a fresh wave of selling in chip stocks.

WTI crude traded above $90 a barrel on Wednesday as intensifying fighting between the U.S. and Iran increased the risk of disruptions to energy flows through the Strait of Hormuz. Elevated energy prices fueled concerns about persistent inflation and prospects for tighter monetary policy, driving up the premium investors demand to hold bonds already under pressure from heavy government spending and corporate borrowing. The 10-year T-note yield rose two basis points to 4.82%, the highest since November 2023.

Chip and AI infrastructure stocks were under pressure in pre-market trading amid rising bond yields. AI-related stocks are particularly sensitive to rising yields because they raise the discount rate applied to future earnings, reducing the present value of their profits and putting pressure on valuations.

Investors are now awaiting the U.S. ADP employment report and quarterly results from chip designer Broadcom.

In yesterday’s trading session, Wall Street’s major indexes closed lower. Chip and AI infrastructure stocks slid, with Lam Research (LRCX) and Applied Materials (AMAT) falling over -3%. Also, cybersecurity stocks declined, with CrowdStrike Holdings (CRWD) slumping over -6% and Palo Alto Networks (PANW) sliding more than -5%. In addition, Alumis (ALMS) cratered over -56% after the biotech company said its lupus drug candidate, envudeucitinib, failed to meet the primary endpoint of a mid-stage trial. On the bullish side, Edison International (EIX) surged over +8% and PG&E Corp. (PCG) climbed nearly +6% following a report that California lawmakers set aside key wildfire legislation that didn’t include liability protection for utilities.

Economic data released on Tuesday painted a picture of a U.S. economy that remains healthy but is losing momentum. U.S. JOLTS job openings rose to 7.271 million in July, but came in below expectations of 7.330 million. Also, the U.S. ISM manufacturing index fell to 54.6 in August, weaker than expectations of 55.2. In addition, U.S. July construction spending fell -0.5% m/m, weaker than expectations of no change m/m.

Fed Governor Michael Barr said on Tuesday that the central bank should stand ready to raise interest rates if inflation does not ease. “If trends in the data give me some confidence that inflation is moderating on a path to 2%, then I think we can take a bit more time to assess our policy stance,” Barr said. “However, if inflation appears not to be moderating sufficiently, then I think we should act decisively to raise rates.”

Meanwhile, U.S. rate futures have priced in a 68.0% probability of a 25-basis-point rate hike and a 32.0% chance of no rate change at the September FOMC meeting.

Today, investors will focus on the U.S. ADP private payrolls report, which is set to be released in a couple of hours. Economists forecast that private-sector payrolls will rise by 47K in August following a 44K gain in July.

U.S. Factory Orders data will also be released today. Economists project July factory orders to rise +0.7% m/m after falling -0.3% m/m in June.

The EIA’s weekly crude oil inventories report will be released today as well. Economists expect crude oil inventories to decline by 0.4 million barrels in the week ended August 28th, compared with an increase of 0.1 million barrels in the prior week.

In addition, the Fed will release its Beige Book survey of regional business contacts today, which provides an update on economic conditions in each of the 12 Fed districts. The Beige Book is published two weeks before each meeting of the policy-setting Federal Open Market Committee.

On the earnings front, chip designer Broadcom (AVGO), cloud data platform provider Snowflake (SNOW), and networking company Hewlett Packard Enterprise (HPE) are among the major names scheduled to release their quarterly results today. Broadcom’s results will attract particular attention, with investors watching to see whether its AI business can sustain its recent growth momentum.

In the bond market, the yield on the benchmark 10-year U.S. Treasury note is at 4.82%, up +0.44%.

The Euro Stoxx 50 Index is down -0.38% this morning, falling for a third straight session as a surge in bond yields dampened risk appetite. Retail and automobile stocks led the declines on Wednesday. At the same time, telecom stocks gained, with Nokia Oyj (NOKIA.H.DX) rising about +1% after index provider STOXX announced that the stock would rejoin the Euro STOXX 50 Index. Meanwhile, Eurozone government bond yields climbed further on Wednesday, with the 10-year German Bund yield reaching its highest level since 2011, as elevated oil prices intensified inflation concerns and reinforced expectations that the Fed and other central banks will raise interest rates. European Central Bank Governing Council member Gabriel Makhlouf told the Financial Times in an interview published on Wednesday that the central bank should not hesitate to raise interest rates further if inflation “starts moving in the wrong direction.” Money markets have almost fully priced in a 25-basis-point rate hike at next week’s ECB meeting. In corporate news, Cirsa (CIRSA.E.DX) jumped over +18% after Lottomatica agreed to acquire the company in a 2.8-billion-euro all-share deal.

The European economic data slate is mainly empty on Wednesday.

Asian stock markets today settled in the red. China’s Shanghai Composite Index (SHCOMP) closed down -0.97%, and Japan’s Nikkei 225 Stock Index (NIK) closed down -2.85%.

China’s Shanghai Composite Index closed lower today, tracking losses across the region as a global bond rout weighed on sentiment. Semiconductor and other AI-related stocks were among the biggest losers on Wednesday. Automobile stocks also sank after China introduced guidelines aimed at ensuring fair competition overseas. Meanwhile, a selloff in Treasuries has driven the yield spread between U.S. and Chinese 10-year bonds back toward a record high, increasing the risk of capital outflows from the Asian nation. Elsewhere, Chinese Premier Li Qiang encouraged U.S. companies to capitalize on opportunities and broaden and deepen their presence in the Chinese market during a meeting with a delegation from the U.S.-China Business Council in Beijing. In corporate news, Shein Global Holdings fell over -5% in Hong Kong, a day after a subdued trading debut following its long-awaited initial public offering.

Japan’s Nikkei 225 Stock Index closed sharply lower today as elevated oil prices continued to push bond yields higher, fueling a risk-off mood. Losses were broad-based on Wednesday, with technology, mining, and automobile stocks among the biggest decliners. Technology companies are particularly sensitive to rising yields as many are valued based on earnings expected to materialize years into the future. Tech investor SoftBank Group sank over -6% and chip gear maker Tokyo Electron fell more than -3%, weighing heavily on the benchmark index. Japanese government bond yields rose further on Wednesday, moving in line with global peers as elevated energy prices fueled inflation concerns, while hawkish remarks from Bank of Japan officials added further upward pressure. BOJ Board Member Hajime Takata, one of the bank’s most hawkish policymakers, on Wednesday left open the possibility of an outsized interest-rate increase as well as consecutive hikes, signaling he might favor a quicker pace of tightening. Earlier, BOJ Governor Kazuo Ueda said after a meeting of Group of 20 finance ministers and central bankers that the board would set policy with upside inflation risks in mind, signaling that a rate hike is likely when officials meet later this month. Elsewhere, Japan’s financial leaders pledged to closely monitor the yen, saying that currency-market stability is vital for both domestic inflation and the global economy. The Nikkei Volatility Index, which takes into account the implied volatility of Nikkei 225 options, closed down -1.66% to 25.55.

Pre-Market U.S. Stock Movers

Chip and AI infrastructure stocks slid in pre-market trading. Marvell Technology (MRVL) was down over -2%, while Intel (INTC), Micron Technology (MU), and Advanced Micro Devices (AMD) were down more than -1%.

Dell Technologies (DELL) surged over +9% in pre-market trading after the company posted upbeat Q2 results and raised its full-year sales outlook amid robust demand for AI servers.

MongoDB (MDB) plunged over -13% in pre-market trading after Q2 revenue growth for its multi-cloud service Atlas came in slower than some investors had anticipated.

Credo Technology (CRDO) slumped more than -8% in pre-market trading as the communications equipment company’s FQ1 results and FQ2 guidance failed to impress investors.

GitLab (GTLB) jumped over +21% in pre-market trading after the coding platform reported stronger-than-expected Q2 results and raised its full-year guidance.

You can see more pre-market stock movers here

Today’s U.S. Earnings Spotlight: Wednesday - September 2nd

Broadcom (AVGO), Snowflake (SNOW), Hewlett Packard Enterprise Company (HPE), NetApp (NTAP), Five Below (FIVE), Brown-Forman (BF.A), Argan (AGX), Netskope (NTSK), Ollie’s Bargain Outlet Holdings (OLLI), Kenon Holdings (KEN), PVH Corp. (PVH), Sprinklr (CXM), C3.ai (AI), G-III Apparel Group (GIII), REX American Resources (REX), FuelCell Energy (FCEL), Gold.com (GOLD), Daktronics (DAKT), Petco Health and Wellness Company (WOOF), Phreesia (PHR), Methode Electronics (MEI), StealthGas (GASS), Matrix Service Company (MTRX), ChargePoint Holdings (CHPT), ZenaTech (ZENA), Tilly’s (TLYS).