US open: Tech and pharma stocks providing a drag early on
US stock markets opened firmly in the red on Wednesday as inflationary concerns were reignited by a jump in bond yields and oil prices.
Falls in the heavyweight tech and pharmaceutical sectors were providing a big drag on the Nasdaq, down 1% by 1051 ET, while the S&P 500 slipped 0.7% and the Dow fell 0.5%.
"US markets took their cues from today’s weakness in European markets, opening lower as concerns over sticky inflation and low growth weighed on sentiment," said analyst Michael Hewson from CMC Markets UK.
A raft of economic data this week showed that the global recovery is far from over, with closely watched purchasing managers' indices (PMIs) across China, Europe and the UK showing that economic activity worsened in August.
In the US, two service-sector PMIs were released but showed a divergence in growth patterns. The ISM services PMI improved to 54.5 in August, up from 52.7 in July and ahead of the 52.5 forecast; while the S&P Global services PMI actually declined to 50.5 from a revised 51 (consensus: 51).
However, it should be noted that the two surveys have one distinct difference: the S&P data includes data from companies exclusively operating in the services economy, while the ISM survey in fact covers any activity that isn't manufacturing.
In other economic data, the US trade deficit widened to $65bn in July, up from a revised $63.7bn in June, though this was better than the forecast of $65.8bn.
Oil prices were at their 2023 highs after Tuesday's surprise news of voluntary production cuts in Saudi Arabia and Russia, as OPEC+ nations attempt to tighten market conditions to keep prices elevated. Crude was trading around the $90-a-barrel mark for the first time since November.
“[The rise in oil prices] may force the likes of the Federal Reserve to keep interest rates higher for longer and this is helping to undercut the more comfortable narrative that the trajectory for rates is on the way to shifting," said AJ Bell investment director Russ Mould.
The yield on a 10-year Treasury was up 3.4 basis points at 4.293% – back close to levels seen last month when it hit a 15-year high.
Stock movers
Pharmaceutical stocks were weighing heavily on the Nasdaq, with Moderna among the fallers despite the news that its updated Covid vaccine was effective against the newest variant.
AstraZeneca was lower after the FDA delayed the approval of its Ultomiris treatment, requesting a few more details before it gives the green light for use in adults with the rare disease, neuromyelitis optica spectrum disorder.
Sector peers Biogen, Vertex, Amgen and Gilead were also trading with moderate losses.
Bucking the trend was Palisade Bio, with the stock up 145% after the company announced a licensing agreeement with Giiant Pharma to develop, manufacture and commercialize Giiant's pro-drug platform focused on therapies for inflammatory bowel disease.
Meanwhile, tech stocks were out of favour with Apple, Nvidia and Tesla in the red.