Chip Stocks Weaken, Oil Steady as Investors Await Hormuz Progress

Chip stocks fell in Asia and the U.S. as investors once again grew nervous about the durability of artificial-intelligence spending

Chip stocks fell in Asia and the U.S. as investors once again grew nervous about the durability of artificial-intelligence spending, while oil held steady in early European trade.

Futures for the S&P 500 gained slightly as Treasury yields were little changed in Asian trade.

Brent crude oil held below $80 a barrel, while U.S. Treasurys and the dollar were little changed as investors await further clarity on the progress of talks to reopen the Strait of Hormuz. Iran and Oman are close to an agreement that would create two lanes for inbound and outbound traffic through the crucial waterway, The Wall Street Journal reported.

The Dow Jones Industrial Average is set to extend its record highs as investors rotated away from chip stocks. Nasdaq futures fell in early European trade after Asian artificial-intelligence names sold off.

For the day ahead, investors watch for U.S. second-quarter nonfarm productivity data and a raft of economic data out of Europe, including the European Central Bank’s latest Economic Bulletin. Warner Bros. Discovery will report earnings later Thursday.

—Brent crude was up 0.5% to $79.84 a barrel in early European trade, while WTI futures rose 0.2% to $75.38 a barrel. The U.S. and Iran were finalizing a draft agreement on Wednesday that would give Tehran oversight of ships entering the Persian Gulf but wouldn’t let it levy tolls or service fees, The Wall Street Journal reported. “Markets have seen plenty of false dawns throughout this conflict,” analysts at Deutsche Bank said. “Nevertheless, [they] continue to lean towards a positive outcome, although much of the good news now appears priced in.” Meanwhile, the latest U.S. data showed domestic crude oil stocks rose by 2.5 million barrels last week, contrary to market expectations for a moderate withdrawal.

—In the U.S., futures for the S&P 500 were up 0.1% while the Dow Jones Industrial Average rose 0.2%. Nasdaq futures were 0.35% lower as chip stocks fell sharply in extended trading. Micron dropped 3.1% premarket, while Sandisk slid over 9% after reporting soaring earnings that weren’t enough to satisfy investor expectations. Shares in data storage group Western Digital fell over 13% premarket after earnings failed to meet similarly high expectations.

—Asian equities were mostly lower as investors parsed valuations following Wall Street’s recent rally. South Korea’s Kospi fell 4.6% and Hong Kong’s Hang Seng Index was 1.6% lower. Chip stocks led the losses with SK Hynix plunging 10% and Samsung Electronics down 6.3%. Japan’s Nikkei 225 index declined 0.9%. SoftBank group shares dropped over 4% after the AI-linked investment group reported a decline in quarterly profit. China’s benchmark Shanghai Composite climbed 0.6%.

—European stock indexes rose in early trade. The Europe-wide Stoxx 600 added 0.3%, led by consumer-facing stocks and healthcare. London’s FTSE 100 moved 0.3% higher, led by a 11% gain for Metlen Energy & Metals after earnings. In Paris, the CAC 40 was 0.75% higher. Luxuries that dominate the index rallied, with Hermes adding 3.4% while sector bellwether LVMH gained 1.3%. The German DAX slipped 0.1%, as Siemens fell 5.5% after reporting earnings, while other industrials weakened. Deutsche Telekom rose 5.8%, however, after upping its buyback. ASML slipped 0.7% as tech weakness in Asia extended into Europe, dragging on the Dutch AEX. The index traded flat. Italy’s FTSE MIB rose 0.5%, while the Spanish IBEX 35 gained 0.9%.

—The dollar rose slightly as markets continue to bet on the Federal Reserve raising interest rates this year despite more positive headlines on the Iran war easing oil prices. Fed governor Lisa Cook said Wednesday she is prepared to support a rate rise if necessary as inflation is too high. The market prices a 60% probability of a Fed rate rise in September and fully prices a move by December. The DXY dollar index rose 0.1% to 99.758.

—U.S. Treasury yields were little changed in Asian trade. “Until a more positive development in the Middle East is confirmed, and ahead of tomorrow’s important U.S. employment data (NFP), markets have taken a wait-and-see stance,” said Karl Steiner of SEB in a note. The two-year Treasury yield rose 1 basis point to 4.188%, while the 10-year yield declined 0.6 basis points to 4.610%, according to Tradeweb.

—Eurozone government bond yields rose slightly. Government bond auctions are due from Spain and France, while Germany detailed next Wednesday’s long-end bond auction. Local economic data, including eurozone retail trade, could provide some input. The 10-year Bund yield rose 0.9 basis points to 3.111%, according to LSEG.

—Bitcoin rose 0.1% to $64,877.

—In early trading, New York gold futures rose 0.2% to $4,314 a troy ounce, up nearly 4% for the week. “The market is increasingly focusing on the disinflationary implications of lower energy prices,” analysts at ING said. “Expectations for Federal Reserve tightening have eased, improving the outlook for nonyielding assets such as gold.”

Write to Barcelona Editors at barcelonaeditors@dowjones.com