Markets Overview

  • ASX SPI 200 futures up 0.2% to 8,871.00
  • S&P 500 down 0.6% to 6,411.37
  • Dow Average little changed at 44,922.27
  • Aussie down 0.6% to 0.6454 per US$
  • US 10-year yield fell 2.7bps to 4.3062%
  • Australia 3-year bond yield rose 5.4 bps to 3.43%
  • Australia 10-year bond yield rose 5.8 bps to 4.33%
  • Gold spot down 0.5% to $3,315.45
  • Brent futures down 0.9% to $65.99/bbl

Economic Events

  • 11:00: (AU) Australia to Sell A$1.5 Billion 1.25% 2032 Bonds
  • 12:00: (AU) RBA’s McPhee, Jones-Panel Discussion

Wall Street’s summer calm cracked as a selloff in big tech dragged down stocks, underscoring the American market’s narrow reliance on a handful of growth giants.

The Nasdaq 100 slid 1.4% — its second-worst drop since April’s tariff shock — led by a 3.5% rout in Nvidia Corp. That pressure overwhelmed gains in over 350 shares in the S&P 500, exposing the fragility of an index propped up by megacaps. Home Depot Inc.’s results lifted big-box retailers while Intel Corp. jumped as the US is ironing out details of a deal to take a 10% stake.

Treasuries rose ahead of Jerome Powell’s Jackson Hole speech Friday, with traders firming up bets on a September cut. Ten-year yields slid three basis points to 4.30%. S&P Global Ratings said revenues from tariffs will help soften the blow to the US’s fiscal health from tax cuts, enabling it to maintain its credit grade. The crypto world joined a slide in risky assets.

Positioning across US equity markets remains at elevated levels following a strong reporting season, according to Citigroup Inc.’s Chris Montagu. At Citadel Securities, Scott Rubner said individual investors are likely to slow their torrid pace of stock buying in September before resuming later this year.

“It is always easier when the markets are going up,” said Nicholas Bohnsack at Strategas. “It is difficult to poke holes in the bull case; the path of least resistance is likely higher, but we find ourselves increasingly worried that traditional risk assets (stocks and bonds) appear priced to perfection.”

Options traders worried about tech weakness after a torrid surge have been trying to protect themselves with “disaster” puts on the Invesco QQQ Trust Series 1 ETF, according to Jeff Jacobson at 22V Research. A measure showing the difference between the cost of hedging against a sharp downturn and a smaller one is at an almost three-year high.

Stretched valuations are partly to blame for the selloff. The Nasdaq 100 is trading at 27 times expected profits in the next 12 months, according to data compiled by Bloomberg.

Bank of America Corp. strategists led by Michael Hartnett have recently said the rally that’s propelled the so-called Magnificent Seven stocks higher from April lows looks stretched. Hartnett has repeatedly warned of a bubble risk in US shares this year.

At Apollo, Torsten Slok says AI will have a significant impact on our lives and productivity. But that doesn’t mean that the tech companies in the S&P 500 are correctly priced. The current situation is surprisingly similar to the tech bubble in the 1990s.

The technology sector reclaimed its spot as the S&P 500’s top performer last quarter, helping indexes rise to all-time highs. Yet to Bret Kenwell at eToro, while valuations appear stretched, elevated growth expectations help justify prices. Meantime, AI enthusiasm as well as momentum can help keep tech in the driver’s seat, he said.

“Whether money continues to flow into the ‘Magnificent Seven’ leaders or rotate within the group, investors will likely look for tech’s continued leadership in the second half of 2025,” he noted.

Much of the recent run-up in tech stocks is an underpinning of strong corporate fundamentals, said Stephen Schwartz at Pioneer Financial, who believes there are legs to the tech rally amid a continued capex boom related to the AI buildout.

“The market has experienced a powerful move off the April lows thanks to policy clarity, upside earnings surprises, and the expectation of lower rates,” he said. “We believe the AI power engine will continue to deliver strong earnings momentum throughout the balance of ’26 pushing stocks to higher levels.”

Meantime, traders are gearing up for Powell’s speech on Friday in Jackson Hole, Wyoming, with the Treasury market seeing a quarter-point rate cut next month as virtually a lock and at least one more by year-end.

“As the market readies for Powell’s speech at Jackson Hole, we’ll argue that the biggest risk for Treasuries is if the Fed chief chooses to throw cold water on the widely anticipated September rate cut,” said Ian Lyngen at BMO Capital Markets.

While this is not Lyngen’s base-case scenario, he says the front-end of the curve is vulnerable to a correction if Powell doesn’t deliver on the degree of dovishness currently anticipated.

Investors are waiting to see if Powell affirms the market pricing — or pushes back with a reminder that new data arriving before the next policy gathering could change the picture. They’re also looking for clues about the longer-run trajectory of Fed cuts into next year.

A couple of weeks ago, when the latest jobs report revealed a slump in hiring, the case for lower rates appeared all but closed. Then came the sharpest spike in US wholesale prices in three years – fuel for the concern about tariff-led inflation that’s kept Fed officials on hold so far this year.

While the recent inflation data has been volatile with some conflicting signals, Schwartz says there’s a market perception that the inflation surge from 2022 is behind us.

“While we expect some near-term volatility, we believe markets will continue to move past the inflation situation, and that the economy and the US consumer are strong enough to continue growing,” he said.

At Bank of America Corp., strategists including Mark Cabana and Meghan Swiber say they don’t think Powell will sound as dovish as the market expects.

“Powell’s reaction function to recent stagflationary data will be key,” they noted. “Will he be spooked by jobs revisions or lean into the labor supply slowdown?”