Big Tech came under heavy pressure on Thursday, with Apple sinking on concern that China will broaden its iPhone ban. Equity futures also fell as jobless claims figures signaled labor-market resilience, reinforcing the case for the Federal Reserve to keep its interest rates elevated.
Nasdaq 100 contracts dropped more than 1%. Apple was on track to wipe out $194 billion of market value in just two days.
Two-year U.S. yields hovered near 5%. The dollar was little changed after hitting an almost six-month high earlier in the week.
The euro retreated as the region barely grew in the second quarter. The onshore yuan slipped to a 16-year low, as pessimism grew toward China’s economy.
Applications for U.S. unemployment benefits fell to the lowest level since February, underscoring businesses’ reluctance to let go of workers.
Initial claims decreased by 13,000 to 216,000 in the week ended Sept. 2. The median forecast in a Bloomberg survey of economists was for 233,000 applications.
“A solid round of employment data that reinforces the perception that the jobs market will remain resilient for the time being,” said Ian Lyngen at BMO Capital Markets.
“From here, the market will remain wary of corporate hedging related flows as they have been the biggest driver of price action in U.S. rates thus far in September.”
Treasuries will also face additional pressure as six potential issuers are looking to sell new U.S. investment-grade bonds Thursday, according to an informal survey of debt underwriters.
Thirty companies have already come to the U.S. primary market in just the last two days following the Labor Day holiday.
The issue volume tally for the week is now $50.58 billion – topping the $45 billion to $50 billion estimate range.
Trillions of dollars of derivatives beyond the reach of central clearinghouses face more regular checks as the industry moves to address criticism it was caught flat-footed in episodes of volatility.
The International Swaps and Derivatives Association, the main industry body for the market, wants traders to adjust margins more often, to buffer losses if bets go awry.
The Standard Initial Margin Model, or SIMM, will undergo semiannual instead of annual recalibrations from 2025, according to ISDA.
Active managers’ holdings last month skewed defensive, according to data compiled by Bank of America.
Hedge funds and active long-only funds have upped their exposure to utilities stocks relative to historical averages. Active equity exposure to “high beta stocks remains well below average,” BofA strategists said.
“People have been very overweight defensives and growth sectors for a while,” said Ohsung Kwon, an equity strategist at BofA.
“People are deploying their capital and slowly moving more to cyclicals, but they’re still waiting for the confirmation.”