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Market sentiment shifts as Wall Street records worst weekly loss since October

Well, I guess it pays to have a bit of perspective in markets at times when the momentum is all go, go, go and record-breaky. After what was a ‘goldilocks’ US jobs report for February — some good, some bad — US stocks retreated on Friday, closing out a volatile five sessions with the worst weekly loss since October.

Go figure, and that means the bullishness locally last week, and especially on Friday, will take a backseat with the overnight futures market showing a 47-point slump for the start of trading today.

Friday’s downturn on Wall Street was due to Nvidia shares taking a breather, down 5.5% for the day but still up 4% for the week. Friday’s fall wiped $US128 billion from Nvidia’s market valuation, the largest for the stock since last May.

Apple shares rose more than 1% on Friday but still fell more than 3% for the week. Friday saw the S&P 500 ease 0.65% to 5,123.69, while Nvidia took the Nasdaq down 1.16% to 16,085.11. Both swung into negative territory after rising to new all-time highs earlier in the session. The Dow shed 68.66 points, or 0.18%, to end at 38,722.69. All three major indexes finished the week lower. The broad S&P 500 pulled back by 0.26, while the Dow and tech-heavy Nasdaq fell 0.93% and 1.17% respectively. That decline marked the worst week for the Dow since October.

“It doesn’t mean that the longer-term upside potential is over,” said Sam Stovall, chief investment strategist at CFRA Research, of Nvidia’s Friday move. “It just says that maybe we’ve gotten ahead of ourselves: We’ve gotten to an overbought situation, and it’s time to take some profits,” he told CNBC.

AMP’s Chief Economist, Shane Oliver, says the current stretched valuations, strong investor sentiment, and overbought positions in the markets mean the chances are high for volatility and even a correction.

“… after very strong gains mean share markets remain at risk of short-term volatility and possibly a correction – as we saw a bit of in the US on Friday – even though the broad environment of mostly ok economic and earnings news, ongoing expectations for rate cuts and enthusiasm for AI points to a continuing rising trend.”

Overseas, Japanese shares rose slightly and are just below their record high. Chinese shares fell over the week and were not helped by only a modest stimulus announcement at the National People’s Congress and are around 40% below their 2021 high. Australian shares rose 1.3% for the week taking them to a new record high helped by the positive global lead and marginally enhanced expectations for RBA rate cuts with gains led by financial, property, and IT stocks more than offsetting losses in resource shares (which will see more losses for iron ore majors but gains for gold companies).

Europe had an up week with the STOXX 600 index closing just under its all-time high on Friday but still up more than 1.1% over the five days. Bond yields generally fell over the week with the key US 10-year yield closing the week around 4.08%, down 10 points over the five sessions. Oil prices fell slightly, gold gained strongly – up more than 4% but the $A rose to end well over 66 US cents early Saturday as the $US fell.

In Australia, the fall Friday and realization of the losing week overall for the booming Wall Street will come as something of a check on the boomish sentiment here. The ASX set a series of record highs last week and inched closer to 8,000 points as investors piled into the big banks and technology stocks on bets that interest rate cuts in the second half of 2024 will bolster corporate profits. Friday saw the ASX 200 close up 1.07% to a record 7,847 points and added 1.3% for the week. Australia’s big four banks and Macquarie powered the market’s gains as all surged to record or multi-year highs. Commonwealth Bank’s market valuation has broken through $200 billion for the first time, as investor hopes of interest rate cuts sparked a rally in bank shares and lifted the market to a record high on Friday. The move means CBA is the only company aside from BHP on the ASX with a market capitalization of more than $200 billion. CBA’s value ended at $203.4 billion at Friday’s close, up 3.3% for the week. The NAB is a clear second with a value of $109 billion, up 2.8%; Westpac’s value rose 4.7% for the week to be third at more than $96 billion and the ANZ saw a 3.5% rise in its value to $89.6 million. Macquarie’ value rose 2.3% to just over $76 billion. After BHP and the CBA above $200 billion, the next biggest companies on the market are Rio Tinto, pharma giant CSL, National Australia Bank, Westpac, ANZ Bank, and Fortescue Metals Group.