Metaverse stocks struggling, as bond yields head towards 4%


Stocks were lower on Tuesday as investors braced for another large rate hike due out Wednesday from the Federal Reserve.

The Dow Jones Industrial Average shed 1.01 per cent, the S&P 500 slid 1.13 per cent and the Nasdaq Composite slumped 0.95 per cent .

The Federal Open Markets Committee began its two-day policy meeting on Tuesday, where central bankers are expected to announce a 0.75 percentage point rate hike on Wednesday.

Yields on US government debt on Tuesday reached their highest level in more than a decade as the Fed’s two-day policy meeting began with the yield on the 2-year Treasury note jumping as high as 3.99 per cent. The yield on the 10-year Treasury briefly topped 3.6 per cent — levels not seen since 2011.

Traders are keeping an eye on the central bank’s projections coming out of the meeting in an attempt to gauge how much further interest rates may rise and what that means for the economy. It’s not what the Federal Reserve does, but what it says it could do in the future that will be most crucial when the central bank ends its two-day meeting Wednesday.


Of note the previous four times the Fed raised interest rates in 2022 in March , May, June and July, the S&P 500 rallied 2.2 per cent, 3 per cent, 1.5 per cent and 2.6 per cent, respectively.

In company news, as we mentioned yesterday in after hours news Ford shares slumped after announcing that supply chain issues would cost an extra $1 billion in the third quarter. Overnight shares of Ford, were down by 12.3 per cent wiping $7 billion off its market value. This announcement came days after a profit warning from FedEx, which is seen as a bellwether of global economic growth.

Across the sectors there isn’t any clear industry providing the market with support – its more a case of outperformance one day followed by under performance the next.

Tech remains one of the worst-performing sectors on the S&P 500 this year, and within that blur of red is the smaller subset of so-called metaverse stocks, or tech companies that are building virtual worlds for gaming, socialising and work. The investor Cathie Wood and Goldman Sachs were among those who heralded the metaverse as the biggest breakthrough in consumer tech since the introduction of the iPhone. They predicted the metaverse would be worth trillions by the end of the decade.

But the rout in metaverse stocks is having a tangible effect on shareholders big and small. Mark Zuckerberg, the founder of Meta, has seen his personal fortune shrink by $71 billion this year, but it seems that investor appetite for tech companies embarking on ambitious, capital-intensive projects has sunk as interest rates soar.

Currencies

The US Dollar index was up 0.4 per cent, with broad strength on the major crosses.

One Australian dollar weakened compared to the US dollar yesterday, buying 66.95 US cents (Tue: 67.30 US cents), 58.82 Pence Sterling, 96.19 Yen and 67.10 Euro cents.

Commodities

Iron ore futures are pointing to a 2.1 per cent fall.

Gold lost $7.10 or 0.4 per cent to US$1671 an ounce.

Silver was down $0.17 or 0.9 per cent to US$19.18 an ounce.

Copper lost $0.95 or 0.3 per cent to US$350.30 a pound.

Oil lost $1.28 or 1.5 per cent to US$84.45 a barrel.

Futures

The SPI futures are pointing to a 1.1 per cent fall.

Figures around the globe

Across the Atlantic, European markets closed lower. Paris dropped 1.4 per cent, Frankfurt lost over 1 per cent while London’s FTSE closed 0.6 per cent lower.

Asian markets closed higher. Tokyo’s Nikkei added 0.4 per cent, Hong Kong’s Hang Seng gained 1.2 per cent and China’s Shanghai Composite closed 0.2 per cent higher.

Yesterday, the Australian sharemarket gained 1.3 per cent to close at 6806.

Ex-dividends

Adbri (ASX:ABC) is paying 5 cents fully franked
Apiam Animal Health (ASX:AHX) is paying 0.4 cents fully franked
Atlas Arteria (ASX:ALX) is paying 20 cents unfranked
Capitol Health (ASX:CAJ) is paying 0.5 cents fully franked
Cash Converters (ASX:CCV) is paying 1 cents fully franked
Consolidated Ops Gp (ASX:COG) is paying 4.8 cents fully franked
Cochlear (ASX:COH) is paying 145 cents 40 per cent franked
Countplus (ASX:CUP) is paying 2 cents fully franked
Cleanaway Waste (ASX:CWY) is paying 2.45 cents unfranked
Embelton (ASX:EMB) is paying 20 cents fully franked
Genesis Energy (ASX:GNE) is paying 8.9267 cents unfranked
Kelly Partners Group (ASX:KPG) is paying 1.5 cents fully franked
Lindsay Australia (ASX:LAU) is paying 1.8 cents unfranked
Lycopodium (ASX:LYL) is paying 36 cents fully franked
Macmahon Holdings (ASX:MAH) is paying 0.35 cents unfranked
NRW Holdings (ASX:NWH) is paying 7 cents fully franked
Shine Justice (ASX:SHJ) is paying 3.5 cents unfranked

Dividends payable

Australian Finance Group (ASX:AFG)
Avjennings (ASX:AVJ)
Aurizon Holdings (ASX:AZJ)
Challenger (ASX:CGF)
Clinuvel Pharmaceuticals (ASX:CUV)
Deterra Royalties (ASX:DRR)
Healius (ASX:HLS)
Hansen Technologies (ASX:HSN)
Ingenia Communities Group (ASX:INA)
Lynch Group Holdings (ASX:LGL)
Lendlease Group (ASX:LLC)
MA Financial Group (ASX:MAF)
Naos Ex-50 Opportunities Company (ASX:NAC)
Naos Small Cap Opportunities Company (ASX:NSC)
Sonic Healthcare (ASX:SHL)
SIV Capital (ASX:SIV)
Suncorp Group (ASX:SUN)
Telstra Corporation Limited. (ASX:TLS)
TPC Consolidated (ASX:TPC)
Veem (ASX:VEE)

Sources: Bloomberg, FactSet, IRESS, TradingView, UBS, Bourse Data, Trading Economics, CoinMarketCap.