Technology weakness offsets earnings resilience as Fed keeps rates unchanged

Market Commentary

US equities closed lower on Wednesday as investors digested the Federal Reserve's (Fed) latest policy decision and a fresh wave of selling in semiconductor stocks ahead of key technology earnings. The S&P 500 slipped 1.50%, the Nasdaq 100 fell 2.10% and the Dow Jones Industrial Average dropped 1 153 points.

Technology shares remained under pressures as Microsoft edged down 0.70% and Meta declined 1.30% ahead of their post‑market results, which traders are scrutinising for clues on artificial intelligence (AI) infrastructure outlays. Concerns that AI‑related capital spending may have become excessive continued to weigh on chipmakers after SK Hynix's disappointing update. Meanwhile, Nvidia dropped 3.50%, Micron tumbled 9.90%, AMD fell 5.50%, and Applied Materials slid 8.40%. Visa recovered 0.60% after reporting revenue growth.

The Fed kept interest rates unchanged, as widely expected, marking a fifth consecutive meeting without a policy change. Three Federal Open Market Committee members dissented in favour of a 25-basis-point increase, while Chair Kevin Warsh reiterated that the central bank would not hesitate to act if required to restore price stability. The US dollar index eased to 101.2 following the decision, while the yield on the 10-year Treasury note edged higher to 4.64% as markets continued to price in the possibility of a rate increase later this year.

European markets also traded weaker as higher energy prices and mixed corporate earnings weighed on sentiment. The pan-European Stoxx Europe 600 slipped 0.29% to 645.01 points, while the Euro STOXX 50 dropped 0.65%, pressured by declines in luxury giant Hermès and rising energy costs. The luxury sector fell 2.40% overall. Hermès tumbled 11% after failing to see a rebound in China, whereas Kering surged nearly 17% following better-than-expected Gucci sales.

Meanwhile, Germany’s DAX 40 ended little changed as gains in Rheinmetall, BASF, Siemens Healthineers, and Deutsche Bank helped offset weakness in Infineon and Siemens Energy. France’s CAC 40 fell 0.60%. London's FTSE 100 outperformed, rising 0.30% as stronger corporate earnings from Standard Chartered, Reckitt, and Rio Tinto offset weakness in Aberdeen Group.

Asian markets delivered a mixed performance. China's Shanghai Composite gained 0.40% and the Shenzhen Component rose 1.10% as selective technology shares recovered despite ongoing concerns around AI-related spending. Japan's Nikkei 225 declined 1.49%, extending recent losses as semiconductor and broader technology shares remained under pressure.

South African equities ended marginally weaker as losses in the resources sector outweighed gains in industrial and financial shares. The FTSE/JSE All Share Index declined 0.19% to 109 904.12 points, while the Top 40 Index eased 0.27% to 101 832.16. Resource shares remained under pressure, with the Resources 10 Index falling 1.88%, and the Metals and Mining Index declining 1.70%. Industrials gained 0.69%, while financials advanced 0.27%. The rand strengthened against the major currencies, appreciating 0.58% against the US dollar, trading at R16.68 and to the British pound at R22.17.

Commodity markets were broadly weaker, despite a sharp mid‑week rebound in crude oil. Crude oil surged more than 7% on Wednesday to around $85 a barrel, snapping a three‑day losing streak as escalating hostilities in the Middle East reignited supply concerns. Reports indicated that Yemen’s Houthi rebels are considering imposing transit fees on commercial vessels navigating the Red Sea, while Iran has signalled similar intentions for the Strait of Hormuz, raising concerns of higher shipping costs and potential disruptions to key energy chokepoints. However, by 20:15 SAST those gains had partly unwound, with Brent down 4.92% at $84.01 per barrel.

Precious metals also came under pressure: gold fell 1.24% to $4 024.41 per ounce, silver declined 2.11% to $57.17 per ounce and platinum eased 1% to $1 615.95 per ounce.