Chip Giants Face Cooling Trend; Asia Sinks as Markets Price In Shift in Fed Rate Hikes

Chip Giants Face Cooling Trend; Asia Sinks as Markets Price In Shift in Fed Rate Hikes​

Asian equity markets experienced a pullback early trading after heavyweight chip stocks gave back significant gains from Thursday’s rally. A gauge measuring Asian equities slipped by 1.1%, while South Korea’s tech-heavy Kospi index dropped over 3%. These regional declines occurred as Wall Street navigated a volatile session, highlighting investor unease regarding the sustainability of high valuations in technology giants.

Technology Volatility Shapes US Market Performance​

The S&P 500 finished flat, unable to sustain an earlier rally fueled by Micron Technology Inc. However, volatility persisted across the tech sector. Apple Inc. shares slid 6.1% after raising prices on Macs, iPads, and home devices.

In contrast, some tech names saw sharp movement driven by future growth prospects. The Nasdaq 100 Index closed up 0.8% after previously rising as much as 2.1%. Qualcomm Inc. jumped following a forecast that promised annual sales exceeding $15 billion from artificial intelligence components in data centers by fiscal 2029.

Asian Stocks Temper Rally Amid Sector Worries​

Asian equities struggled to maintain momentum, with shares of SK Hynix Inc., Samsung Electronics Co., and Kioxia Holdings Corp. acting as key drags on the regional benchmark. The slowdown reflected growing concerns over whether tech giants can continue justifying their high stock expectations.

The uncertainty persists despite earlier positive indicators from some component makers. Meanwhile, OpenAI is reportedly considering delaying an initial public offering until 2027, according to reports citing those involved in its deliberations.

Macro Indicators Drive Shift in Fed Rate Expectations​

Focus turned toward interest rate movements as the Federal Reserve’s preferred inflation gauge rose by 0.4% in May. This figure was below economists' median estimate for a 0.5% increase. The annual inflation rate accelerated to 4.1%, which remains above the Fed’s 2% target.

Despite this, market pricing is moving toward lower interest-rate hike expectations. Interest-rate swaps linked to future Fed rate decisions show wagers have dropped, anticipating about 34 basis points of tightening by the December policy meeting compared to 36 basis points previously. The probability of a rate increase next month has dwindled to about one in three.

Commodities React to Inflation and Geopolitical Tensions​

In commodities markets, gold remained steady after rebounding above $4,000 an ounce in the previous session as traders tempered expectations for future interest-rate hikes. Meanwhile, oil prices edged lower in early Asian trading following a projectile strike on a vessel in the Strait of Hormuz that had previously driven Brent crude up.

The shift is mirrored by experts who believe inflation pressures are easing. Brian Jacobsen at Annex Wealth Management commented that "The worst of inflation and consumer angst may be mostly behind us." Federal Reserve Bank of New York President John Williams noted that interest rates are well positioned to bring inflation back towards the central bank’s target.