Stocks opened lower in Japan, Australia and South Korea while MSCI’s Asia Pacific Index fell 0.3%. Contracts for the Nasdaq 100 index slipped 0.2% after a 1.4% drop Tuesday, the second-worst decline since April’s tariff shock. The slide was driven by a 3.5% slump in Nvidia Corp. as stock rotation hit megacap tech companies.
Treasuries steadied in early Asian trading after 10-year yields dropped three basis points to 4.31%. Oil rose 0.4% after declining in the prior session. A gauge of the dollar extended its gains to a third day.
Investors pared back positions in technology stocks — the market’s longtime leaders — amid growing concern that the rally since April has advanced too far and too quickly. That momentum will be tested this week as focus turns to Jackson Hole, Wyoming, where Federal Reserve Chair Jerome Powell is set to speak on Friday with traders firming up bets on a September cut.
“Wall Street finally hit an air pocket overnight as the US summer lull thins liquidity and weakens the bid for risk assets, especially high flying tech stocks,” wrote Kyle Rodda, a senior market analyst at Capital.com in Melbourne. “There’s also a degree of trepidation heading into the Jackson Hole symposium.”
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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.“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.”Meanwhile, US Homeland Security Secretary Kristi Noem indicated the government will step up scrutiny of imports of steel, copper, lithium and other materials from China to enforce a ban on goods allegedly made with forced labor in the country’s Xinjiang region.