Cyclical sectors lift Dow to record high ahead of US holiday

Market Commentary

US equity indices finished mixed on Thursday, with technology names driving volatility ahead of the Independence Day holiday despite easing fears of near-term rate hikes. The S&P 500 ended unchanged, while the Nasdaq 100 slipped 0.80%. Chip stocks fell for a second session amid growing investor scrutiny over whether AI-driven enthusiasm has stretched valuations too far.

Reported developments included talks that OpenAI may sell a 5% stake to the US government and Meta, down 4.90%, signalling plans to monetise surplus compute capacity. Micron Technology dropped 7%, Applied Materials declined 7.40% and Advanced Micro Devices fell 4.30%. SanDisk plunged 14% and Marvell tumbled 9.80%. Tesla slid 7.50% despite reporting strong deliveries. Apple gained 4.80%, while Visa and Walmart each rose roughly 3%.

In contrast, the Dow rose 595 points to a fresh record as cyclical sectors outperformed, supported by a softer-than-expected June jobs report. For the week the Dow advanced about 1.80%. US labour market data pointed to a cooling economy.

European equities closed substantially higher, hitting fresh record highs as an improved macroeconomic outlook supported corporate sentiment. The STOXX Europe 600 gained 1.40% and the Euro STOXX 50 rose 1.20%, while Germany’s DAX climbed 2.20% to a record close. The UK’s FTSE 100 added 1.70%, led by strong gains in pharmaceutical, defence and financial stocks.

Asian markets were weaker as the global technology sell-off weighed on sentiment. Japan’s Nikkei 225 dropped 2.47% as AI-related shares came under heavy pressure, while China’s Shanghai Composite fell 2.03% amid broad-based weakness in technology stocks.

South African markets closed higher, supported by gains in resource and financial shares. The FTSE/JSE All Share Index rose 0.76%, while the Top 40 advanced 0.80%. Precious metals producers benefited from stronger commodity prices, lifting the Resources 10 Index by 1.71%, while the Financial 15 Index gained 1.48%. The rand strengthened to R16.24 against the US dollar.

On the commodity front, Brent crude oil recovered from an earlier 2% drop as market participants sought to secure supplies ahead of the extended US Independence Day weekend. Prices, however, remained at their weakest since 27 February as shipping through the Strait of Hormuz continued its steady recovery as optimism around US-Iran negotiations continued. Precious metals rebounded with gold gaining 2.37%, while silver and platinum recovered from seven-month lows.