A sell-off in semiconductor shares pulled the S&P 500 lower on Monday, wiping out an early rally that cheaper oil had sparked after the U.S. and Iran paused hostilities. ASML, AMD and Micron led the chip declines as reports pointed to intensifying Chinese competition. Traders now face four Big Tech earnings reports and a Federal Reserve rate decision in the same week.
A plunge in chip stocks dragged the S&P 500 lower on Monday, negating an earlier rally that a decline in global oil prices had sparked.
The broad market index traded 0.2% lower, while the Nasdaq Composite slipped 0.5%. By contrast, the Dow Jones Industrial Average held a gain of 120 points, or roughly 0.2%.
Semiconductors erase an early rally
Chip stocks fell broadly. The VanEck Semiconductor ETF traded more than 3% lower, adding to its Friday losses. AMD and Teradyne dropped 7% and 6%, respectively, to lead the declines. Micron Technology shed nearly 6%.
Reuters counted technology as the weakest group on the S&P 500 index, slipping 1.4% with chip names leading the slide. The Philadelphia SE Semiconductor Index dropped 4%. That leaves the gauge about 22% below its June record high. Nvidia dropped 4.4%.
Chipmakers had climbed earlier in the day after Chinese chipmaker CXMT’s IPO on the Shanghai Stock Exchange. But equities came under pressure after The Information reported, citing sources familiar with the matter, that China had begun developing deep ultraviolet lithography machines used to build semiconductors. U.S.-listed shares of ASML, the dominant player in the space, fell more than 7% on the back of the report.
Thomas Martin, senior portfolio manager and partner at Globalt Investments, told CNBC: “There’s just a lot of uncertainty about what is happening with Chinese companies”.
Oil retreats as U.S.-Iran fighting pauses
Cooling tensions in the Middle East sent international benchmark Brent crude futures for September delivery down 6.8% to around $90.25 a barrel. U.S. West Texas Intermediate crude futures dropped 6.1% to $83.83 a barrel.
Big Tech earnings and the Fed land in the same week
Quarterly reports from Amazon, Apple, Meta Platforms and Microsoft will either soothe investor fears of rampant artificial intelligence spending or add to them, following Alphabet’s disappointing results in the last week. Those results could directly affect the semiconductor companies that are the chief beneficiaries of the AI spending spree.
The Fed makes its latest decision on interest rates on Wednesday. Consensus points to a September rate hike, yet markets are pricing in a meaningful possibility of a quarter-percentage-point lift as soon as this week, according to the CME FedWatch Tool.
Sources: CNBC, Investing.com
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