Most Asian equity markets were poised to drop as US stocks fell amid signs of buyer fatigue after a rally to record highs. The yen was in focus ahead of inflation data that could draw a line under a six-day slump.
Futures for benchmarks in Japan and Hong Kong pointed to declines while contracts for Australia were little changed. A 1% drop in the Golden Dragon index of US-listed Chinese companies may also weigh on sentiment.
The S&P 500 briefly topped 5,500 on Thursday before losing traction, while the high-flying tech group powering the bull run came under pressure. The Nasdaq 100 slipped after a seven-day advance with Nvidia Corp. and Apple Inc. leading losses in megacaps.
“Bullish momentum remains intact for the S&P 500 and Nasdaq, but near-term overbought conditions coupled with deteriorating breadth make equities vulnerable to a pullback or correction,” said Craig Johnson at Piper Sandler.
The yen was steady in early Friday trading after its longest losing streak since March put traders on alert for potential intervention. Inflation data is expected to show a pickup in May that Bloomberg Economics says could give a “greenlight” for the Bank of Japan to raise rates again in July. Policymakers left them unchanged and declined to give details on paring bond purchases at their meeting a week ago.
On Thursday, the US Treasury had announced the addition of Japan to a foreign-exchange monitoring list as part of a report to Congress, but did not name Japan or any other country as currency manipulators.
Elsewhere, the franc led losses in developed-world currencies on Thursday as the Swiss National Bank lowered borrowing costs, while a gauge of dollar strength rose for the first time in four days.
Economic Softening
After coming close to erasing this year’s losses, Treasuries fell despite data that mostly pointed to economic softening. New home construction slumped to the slowest pace in four years and the Philadelphia Fed Index trailed estimates. US initial jobless claims were little changed. Federal Reserve Bank of Minneapolis President Neel Kashkari said the central bank will return inflation to 2%, but estimated it will likely take a year or two to do so.
While the S&P 500 has set 31 new records this year, few of its members outside of technology have participated in the advance.
In the last three months, the 10 largest stocks in the index by market capitalization — mostly tech giants — have largely outperformed the rest, according to data compiled by Bloomberg Intelligence equity strategist Gillian Wolff.
The S&P 500 may rally close to an additional 10% this year, if past market manias are any guide, according to Stifel, Nicolaus & Co. But like prior “bubble” episodes, this one eventually has to pop too.
Stifel’s Barry Bannister says the US stock benchmark has a shot at reaching the 6,000 mark before the end of 2024 as investors keep piling in, up from just below 5,500 Thursday. But by mid-2026, he expects the gauge to sink back to where it began this year — around the 4,800 level — erasing a fifth of its value.
In commodities, oil rose as a drawdown in US crude inventories extended a rally that has been supported by the hot streak for equity markets. Gold also advanced. – Bloomberg
