Tech Stocks Likely To Lead Extended Pullback On Wall Street

The major U.S. index futures are currently pointing to a notably lower open on Friday, with stocks likely to extend the pullback seen in the previous session.

Technology stocks are likely to lead the way lower once again, as reflected by the 1.9 percent slump by the tech-heavy Nasdaq 100 futures.

A steep drop by shares of Netflix (NFLX) is likely to weigh on the tech sector, with the streaming giant plunging by 11.3 percent in pre-market trading.

Netflix is under pressure after reporting second quarter results roughly in line with estimates but providing disappointing third quarter guidance.

Concerns about valuations may also weigh on tech stocks ahead of earnings news from tech giants Alphabet (GOOGL), Amazon (AMZN), Microsoft (MSFT) and Meta Platforms (META) next week.

The downward momentum on Wall Street also comes amid a sharp increase by the price of crude oil, with U.S. crude oil futures surging back above $80 a barrel amid concerns about the escalating conflict in the Middle East.

Tehran launched strikes against several countries across the Gulf and wider region after the U.S. launched a wave of strikes against Iran for the sixth night in a row over control of the Strait of Hormuz.

Stocks moved mostly lower during trading on Thursday, giving back ground following the upward move seen over the two previous sessions. The major averages all moved to the downside, with the Nasdaq showing a significant decline.

The major averages regained some ground going into end of the day but still closed in negative territory. The Nasdaq tumbled 387.28 points or 1.5 percent to 25,881.95, the S&P 500 slid 38.63 points or 0.5 percent to 7,533.77 and the Dow dipped 105.67 points or 0.2 percent to 52,552.97.

The pullback on Wall Street came amid renewed weakness among technology stocks, as reflected by the slump by the tech-heavy Nasdaq.

Computer hardware stocks turned in some of the worst performances, with the NYSE Arca Computer Hardware Index plummeting by 4.6 percent.

Substantial weakness is also visible among semiconductor stocks, as reflected by the 4.3 percent plunge by the Philadelphia Semiconductor Index.

Shares of Taiwan Semiconductor (TSM) tumbled by 2.3 percent after the chipmaker reported better than expected second quarter results but forecast an increase in capital spending.

“While the case for boosting capacity is clear at a time when there is a large gap between supply and demand, shareholders will want TSMC to retain some discipline even as it looks to meet orders piling up,” said AJ Bell head of markets Dan Coatsworth.

Outside of the tech sector, gold stocks moved sharply lower along with the price of the precious metal, dragging the NYSE Arca Gold Bugs Index down by 4.4 percent.

Brokerage and steel stocks also saw notable weakness, while transportation stocks showed a significant move to the upside, resulting in a 3.2 percent surge by the Dow Jones Transportation Average.

Commercial real estate, housing and healthcare stocks also saw considerable strength, limiting the downside for the broader markets.

In U.S. economic news, a report released by the Labor Department showed first-time claims for U.S. unemployment benefits unexpectedly dipped to a two-month low last week.

The Labor Department said initial jobless claims fell dipped to 208,000 in the week ended July 11th, a decrease of 8,000 from the previous week’s revised level of 216,000.

Economists had expected jobless claims to rise to 220,000 from the 215,000 originally reported for the previous week.

With the unexpected decrease, jobless claims dropped to their lowest level since hitting 199,000 in the week ended May 2nd.

Meanwhile the Commerce Department released a separate report on Thursday showing a modest increase in U.S. retail sales in the month of June.

The Commerce Department said retail sales crept up by 0.2 percent in June after climbing by an upwardly revised 1.0 percent in May.

Economists had expected retail sales to rise by 0.3 percent compared to the 0.9 percent increase originally reported for the previous month.

Commodity, Currency Markets

Crude oil futures are surging $2.02 to $80.97 a barrel after sliding $0.65 to $78.95 a barrel on Thursday. Meanwhile, after tumbling $59.70 to $3,992.10 an ounce in the previous session, gold futures are slipping $8.60 to $3,983.50 an ounce.

On the currency front, the U.S. dollar is trading at 162.39 yen versus the 162.38 yen it fetched at the close of New York trading on Thursday. Against the euro, the dollar is valued at $1.1428 compared to yesterday’s $1.441.

Asia

Asian stocks fell for a second straight session on Friday amid growing questions about sky-high artificial intelligence-driven valuations.

Additionally, Netflix forecast a second consecutive quarter of slowing sales growth and SpaceX aborted Flight 13 of its giant Starship rocket at the last minute, contributing to investor anxiety ahead of the weekend.

With the chip trade getting hit hard, traders now await earnings results from prominent U.S. tech companies, including Alphabet, Amazon, Microsoft and Meta Platforms next week for further direction.

The U.S. dollar held steady in Asian trading but was poised for a weekly decline after the release of softer U.S.CPI and PPI data.

Gold rose about half a percent to $3,997 an ounce but was on track for a significant weekly loss on oil-led inflation worries.

Dallas Fed President Lorie Logan on Thursday called for “modestly” higher interest rates to balance the Fed’s dual mandate.

Arguing that inflation remains far above the Fed’s 2 percent target, she warned that without policy action, inflation could become more entrenched, requiring more severe rate hikes later.

Brent crude futures traded near $85 a barrel and were on track for a 12 percent weekly gain as shipping traffic through the Strait of Hormuz slumped. The U.S. intensified strikes against Iran, hitting overnight an oil tanker near the country’s main oil terminal.

China’s Shanghai Composite Index tumbled 3.1 percent to 3,764.15 as CXMT’s $8.6 billion IPO and a pipeline of large listing raised fears of a liquidity crunch.

U.S.-China tensions also remained on investors’ radar after U.S. President Donald Trump accused Beijing of exploiting U.S. election data in an extraordinary primetime speech in Washington.

Hong Kong’s Hang Seng Index tumbled 1.8 percent to 24,562.24 after an overnight sell-off in U.S. semiconductor stocks on concerns over elevated valuations in AI-related companies.

Japanese markets plummeted as investors sold off chipmakers and other AI-related shares amid worries that their prices have shot too high. The Nikkei 225 Index plunged 4 percent to 64,141.12, while the broader Topix Index settled 2.7 percent lower at 3,919.21.

Kioxia Holdings nosedived 16.1 percent, while Advantest, Tokyo Electron and SoftBank lost 7-9 percent.

Markets in South Korea were closed for a holiday. Australian markets ended lower as lower gold and copper prices weighed heavily on the mining sector.

The benchmark S&P/ASX 200 Index dropped half a percent to 8,796.70, while the broader All Ordinaries Index shed 0.6 percent to close at 8,978.80.

Across the Tasman, New Zealand’s benchmark S&P/NZX-50 Index rose 0.6 percent to 13,694.68, snapping a four-session losing streak.

Europe

European stocks have moved mostly lower on Friday as AI-driven jitters continued to weigh and the Persian Gulf conflict drags on.

Oil prices headed for a 10 percent weekly gain amid escalating Middle East tensions.

Tehran launched strikes against several countries across the Gulf and wider region after the U.S. launched a wave of strikes against Iran for the sixth night in a row over control of the Strait of Hormuz.

State media reported that the U.S. had hit civilian infrastructure, including bridges, a train station and an airport.

Iran’s Revolutionary Guards (IRGC) reportedly hit targets in Oman, Kuwait and Bahrain amid an expanding regional confrontation. They also claimed to have attacked a U.S. special operations command center in Syria.

The French CAC 40 Index is down by 0.7 percent and the German DAX Index is down by 0.6 percent, although the U.K.’s FTSE 100 Index is nearly unchanged.

Tech stocks suffered heavy losses, with Infineon Technologies and ASML Holding moving sharply lower.

Swedish builder Skanska has also tumbled after reporting second quarter revenue in line with expectations.

Industrial bearings maker SKF has also shown a significant move to the downside after its second quarter sales came in flat.

Danish lender Danske Bank has also fallen despite beating second quarter profit forecasts and raising its full-year outlook.

Share of British luxury fashion house Burberry has also plunged. The company’s recovery continued in the second quarter even as European & Middle East sales fell 3 percent amid the Iran war.

On the other hand, Saab has moved sharply higher after reporting a sharp increase in second quarter earnings.

U.S. Economic News

Import prices in the U.S. unexpectedly saw further upside in the month of June, according to a report released by the Labor Department on Friday.

The Labor Department said import prices rose by 0.3 percent in June after jumping by a downwardly revised 1.7 percent in May.

Economists had expected import prices to decrease by 0.3 percent compared to the 1.9 percent surge originally reported for the previous month.

Meanwhile, the report said export prices slid by 0.6 percent in June after growing by a downwardly revised 1.2 percent in May.

Economists had expected export prices to fall by 0.4 percent compared to the 1.3 percent jump originally reported for the previous month.

A separate report released by the Commerce Department on Friday showed a substantial rebound in new residential construction in the U.S. in the month of June.

The Commerce Department said housing starts skyrocketed by 19.0 percent to an annual rate of 1.427 million in June after plummeting by 15.2 percent to a revised rate of 1.199 million in May.

Economists had expected housing starts to spike by 12.2 percent to an annual rate of 1.320 million from the 1.177 million originally reported for the previous month.

Meanwhile, the report said building permits slumped by 3.0 percent to an annual rate of 1.367 million in June after falling by 0.9 percent to a revised rate of 1.410 million in May.

Building permits, an indicator of future housing demand, were expected to edge down by 0.2 percent to an annual rate of 1.410 million from the 1.413 million originally reported for the previous month.

At 9:15 am ET, the Federal Reserve is scheduled to release its report on industrial production in the month of June. Industrial production is expected to rise by 0.2 percent in June after inching up by 0.1 percent in May.

The University of Michigan is due to release its preliminary report on consumer sentiment in the month of July at 10 am ET. The consumer sentiment index is expected to climb to 51.3 in July from 49.5 in June.