S&P 500 and Nasdaq Decline as Chip Stocks Fall and Investors Await Earnings Reports

S&P 500 Gains and Losses Today: Chip Stocks Fall on Possible Export Restrictions

Shares of semiconductor equipment providers and chipmakers suffered heavy losses. Tech stocks, and particularly shares of semiconductor firms, have played a key role in driving major U.S. equities indexes to record highs, but the tides changed on Wednesday. The broad-based S&P 500 fell 1.4%, while the tech-heavy Nasdaq plunged 2.8%. The Dow ended the day 0.6% higher, boosted by a rotation away from tech and outperformance from several constituents in the health care sector. Geopolitical uncertainty dragged down the tech sector following reports that the U.S. is considering rules that would rein in exports of semiconductor equipment to China. Shares of companies in the semiconductor industry dominated the list of the S&P 500's weakest daily performers. Equipment suppliers Applied Materials (AMAT), Lam Research (LRCX), and KLA Corp. (KLAC) all dropped roughly 10%. So did Advanced Micro Devices (AMD). Several other S&P 500 chipmakers were down in the 8% to 9% range. Vistra Corp. (VST) shares sank 11.3%, the steepest losses of any S&P 500 stock. The utility stock posted outsized gains in the first half of 2024, driven by optimism that it could benefit from a boost in energy demand from data centers running artificial intelligence (AI) applications, but it has changed course in July. The losses come amid questions about the power grid in the company's home state of Texas after significant outages in the wake of Hurricane Beryl. The wind came out of shares of GE Vernova (GEV), spun off from the GE conglomerate in April, which plunged 9.3%. The independent power company's shares lost ground amid anticipation of a potential return to the presidency for Donald Trump, who has been a vocal opponent of generating energy using wind turbines, which account for a major part of GE Vernova's business. Another April spinoff fared much better on the day. Shares of Solventum (SOLV), the health care firm that separated from 3M (MMM), notched the best performance in the S&P 500, gaining 5.9%. Although Morgan Stanley cut its price target on Solventum stock earlier this week, analysts said they still have a favorable outlook for the medical technology industry, forecasting strong utilization and volumes. Progressive (PGR) shares were up 5.4%, reversing losses posted in the previous session after the property and casualty insurer posted mixed quarterly results. Although revenue came in shy of estimates, profits were better than expected, and analysts noted strength in Progressive's underwriting profitability. Shares of dental and medical products supplier Henry Schein (HSIC) also added 5.4%. The company cut the ribbon last week on a new distribution center in Fort Worth, Texas. At 811,000 square feet, the new facility is the largest in Henry Schein's global network. FMC Corp. (FMC) shares advanced 4.6%. The agricultural sciences firm announced the appointment of John M. Raines to its board of directors. Raines arrives with more than three decades of experience that includes key roles at top food and agriculture companies.

Stock Market News Today: Markets largely lower as global chip sell-off weighs (SP500)

Wall Street's tech-heavy Nasdaq Composite (COMP:IND) on Wednesday plunged and was on track for its worst session of 2024, as chip stocks across the globe took a hit on U.S.-China trade curb worries. On the other hand, the blue-chip Dow (DJI) surpassed the historic 41,000 points level for the first time ever, buoyed by yet another post-earnings jump in one of its components. It had climbed 0.39% to 41,099.40 points in afternoon trade. The benchmark S&P 500 (SP500) also took it on the chin due to the weakness in semiconductors. The index was last down 1.40% to 5,587.84 points in midday trade, while the Nasdaq (COMP:IND) had slid 2.75% to 17,999.46 points. Of the 11 S&P sectors, Technology and Communication Services unsurprisingly topped the losers, with the former shedding more than 3.5% and the latter slipping more than 2%. Defensive sector Consumer Staples was the biggest gainer. A Bloomberg report earlier in the day said that the U.S. government was mulling further export curbs on chip companies including Dutch giant ASML (ASML) if they continued to provide China access to advanced semiconductor technology. The news sent U.S.-listed shares of ASML (ASML) slumping more than 11%, despite the company reporting strong bookings for its second quarter. American chip stalwarts such as Advanced Micro Devices (AMD), Qualcomm (QCOM) and Nvidia (NVDA) also retreated. "Ugly start of the day for stocks. Tech sell off into the beginning of earnings. ASML beats but is doing a lot of business in China. Chips are clearly power in the (artificial intelligence) world order and the U.S. wants to protect its tech dominance," Ross Gerber, co-founder of Gerber Kawasaki Wealth & Investment Management, said on X (formerly Twitter). Meanwhile, U.S. presidential candidate Donald Trump in a Bloomberg interview said that Taiwan "should pay us for defense." His remarks about the island nation - which is at odds with its massive Asian mainland neighbor China - negatively impacted shares of Taiwan Semiconductor Manufacturing (TSM), the world's largest semiconductor foundry. Conversely, Global Foundries (GFS) and Intel (INTC), which compete with TSM in the foundry market, saw their stocks climb. The latter provided a boost to the Dow (DJI) as well. Speaking of the blue-chip index, the venerable gauge was also lifted by Johnson & Johnson (JNJ). The pharmaceutical giant delivered a quarterly top- and bottom-line beat, as strong sales of its drugs, including blockbuster medicines Stelara and Darzalex, helped offset a middling performance at its medical tech division. Turning to Wednesday's economic calendar, the housing starts and permits report for June came in before the opening bell, with both metrics showing a ~3% M/M rise. Soon after, U.S. industrial production for June arrived, growing at a higher pace than expected. Following the start of regular trading, the Atlanta Federal Reserve's gauge of year-ahead business inflation expectations came in relatively unchanged in July. In terms of monetary policy, Fed Governor Christopher Waller grabbed some attention after he said that the central bank was getting closer to cutting interest rates. Looking at the fixed-income markets, U.S. Treasury yields on Wednesday showed little reaction to a $13B 20-year bond auction that traded through. The longer-end 30-year (US30Y) and 10-year yields (US10Y) were both largely flat at 4.37% and 4.16%, respectively. The shorter-end, more rate-sensitive 2-year yield (US2Y) was up 2 basis points to 4.45%.