The once lauded Nasdaq Composite (NASDAQ: .IXIC) index set an unwanted record in trading overnight.
Tormented by worsening expectations, the tech-heavy index veered 0.74% downwards to 11,545 points. Unfortunately, the negative move places the index on a seven-day losing streak. Chillingly, this is an achievement that hasn't occurred in nearly six years.
Last night's move takes the tech benchmark's performance for the year to a bitterly disappointing fall of 27%. For comparison, Australia's own tech-focused index — the S&P/ASX All Technology Index (ASX: XTX) — is also down a disastrous 29.8% this year.
Let's look at what might have induced the Nasdaq's woeful showing last night.
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Too much of a good thing sets interest rate expectations
Data released overnight indicated a stubbornly robust economy in the United States, at least in pockets. According to reports, the US services industry experienced further growth in August. The positive posting was the second consecutive month for the industry.
While at face value this seems to be a positive indication, investors interpret this as a possible precursor to resistant inflation readings. Ultimately, if the economy is still running hot and is showing no sign of recession, Federal Reserve chair Jerome Powell is more inclined to jack up interest rates again at the next meeting.
However, S&P Global's US Services Purchasing Managers Index painted a different picture. The report suggested that the US economy had slipped further into a downturn in August. Specifically, this was a result of weakened domestic and foreign client demand.
Furthermore, the release stated that output charge inflation eased to the slowest in a year and a half. Likewise, the contraction in global economic output was the first since mid-2020, as shown above.
What about Australia?
Today, Aussie investors will get their own dose of economic data to mull over. Second quarter gross domestic product (GDP) figures are being released as we speak.
It appears the S&P/ASX 200 Index (ASX: XJO) is factoring in similar pain to what the Nasdaq experienced last night. At the time of writing, the ASX 200 is down 1.43% to 6,729 points.
Most analysts are expecting solid growth in Australia's GDP year on year. For example, the team at St George is forecasting a 3.6% increase compared to the second quarter of last year. The team attributes the expected strength to strong household spending and net exports.
