US markets edged lower on Tuesday after high-cap tech stocks tumbled despite mostly bullish quarterly results over the past week.
Dow Jones, S&P 500 and Nasdaq futures fell between 0.1% and 0.3%, indicating a weaker start at the opening of trading later.
The plummeting stocks of Amazon, Alphabet, Facebook and Microsoft affected the broader market. According to strategists at Deutsche Bank, chipmakers have also come under pressure as the current semiconductor shortage has a huge impact on delivery times and prices.
“There appears to be general price inflation across most, if not all, supply lines,” they said. “This is in line with what many companies are reporting this season and has led many to cut their 2021 production guidance, even as consumer demand continues to rebound with the broader economy.”
But with results from most S&P 500 companies, 85% of companies beat expectations.
UBS chief investment officer Mark Hafele said investors should be careful not to reallocate funds into their portfolios to high-tech companies. “With growth accelerating, we continue to prioritize cyclical and value sectors such as finance and energy, while positioning ourselves for long-term structural growth in industries that can provide ‘the next big step,’” he said.
The US dollar rose after Federal Reserve Chairman Jerome Powell said the US economic outlook was “clearly better,” but slower for those in low-paying jobs. In terms of rising house prices, Powell pointed to a sharp increase in demand fueled by low mortgage rates and financial incentives. He expects that “the housing market will be tight for some time because the demand is very, very high.”
Across the pond, the European Commission is proposing a travel plan that will replace the current general ban on non-essential travel to the region, which has been in effect for about a year, according to the Guardian. Fully vaccinated people from low-infection countries may be allowed to enter the EU by early June under the proposed vaccine passport system.
In the UK, a string of local and regional elections will take place on Thursday, which were postponed last year due to the pandemic. On the same day, the Bank of England will announce its latest monetary policy decision.
“In terms of when they can start cutting back on their quantitative easing operations, (economists) think it will be between May and June, but ultimately the Bank of England will wait until June,” strategists at Deutsche said.
London’s FTSE 100 was up 0.6%, the Euro Stoxx 50 was little changed and the French CAC 40 was up 0.2%.
Activity in Asian markets was somewhat muted by public holidays in China and Japan on Tuesday. The Hong Kong Hang Seng added 0.8%.