Wall Street‘s record-setting rally hit a snag on Wednesday as concerns about escalating trade tensions with China impacted some of the market’s biggest winners of the year.
The S&P 500 fell 0.9%, a day after achieving its 38th all-time high this year. The Dow Jones Industrial Average added 72 points, or 0.2%, reaching its own record, while the Nasdaq composite dropped 1.7% as of 9:35 a.m. Eastern time.
Chip companies experienced some of the sharpest declines following a Bloomberg News report that President Joe Biden is considering the most stringent trade restrictions available if companies like the Netherlands’ ASML and Japan’s Tokyo Electron continue supplying advanced semiconductor technology to China. The U.S. government has blocked Chinese access to advanced chips and the equipment to produce them, citing security concerns, and has encouraged its allies to do the same.
ASML saw its U.S.-traded shares fall 9%, despite reporting spring sales at the high end of its forecasted range. Shares of Tokyo Electron dropped 7.5% in Tokyo, reducing its year-to-date gain to 32.2%.
Taiwan Semiconductor Manufacturing Co. (NYSE:TSMC) also saw its shares decline after former President Donald Trump criticized Taiwan, which is claimed by Beijing and which the U.S. is obligated to defend if attacked.
“Taiwan should pay us for defense,” Trump said in an interview transcript published by Bloomberg. “Taiwan took our chip business from us. How stupid are we?”
TSMC’s U.S.-traded shares dropped 5.6%.
Wall Street’s Top Performers Are Sliding
The negative sentiment extended to other chip stocks globally, including major U.S. players that have been some of Wall Street’s top performers this year amid excitement over artificial intelligence technology. Nvidia fell 4.4% after soaring 155.2% this year through the previous day. Advanced Micro Devices fell 5.8%, and Broadcom dropped 4.5%.
Losses outside the technology sector were milder but still noticeable.
Five Below, a retailer targeting teens and tweens with products priced at $5 or below, tumbled 15.3% after its CEO, Joel Anderson, resigned to pursue other interests. Co-founder Thomas Vellios was named executive chairman on an interim basis. The company also issued a profit forecast for the second quarter that fell short of analysts’ expectations.
Spirit Airlines lost 7.1% after the discount carrier lowered its revenue forecast for the second quarter, citing lower-than-expected fees outside of ticket sales.
J.B. Hunt Transport Services fell 4.7% after reporting weaker-than-expected profit and revenue for the latest quarter, impacted by higher insurance and claims costs, among other issues.
However, some stocks performed well. Johnson & Johnson rose 1.7% after surpassing analysts’ profit forecasts for the latest quarter, helping the Dow Jones Industrial Average to rise despite the declines in chip stocks. U.S. Bancorp also rallied 3.6% after beating analysts’ forecasts for profit and revenue.
In the bond market, the 10-year Treasury yield held steady at 4.16%, unchanged from late Tuesday.
In international markets, London’s FTSE 100 rose 0.1% after data showed the inflation rate remained steady at the Bank of England’s 2% target in June. Indexes across Europe and Asia were mixed. Hong Kong’s Hang Seng gained 0.1%, while stocks in Shanghai fell 0.5% as traders awaited the outcome of a top-level policy-setting meeting of the ruling Communist Party, expected to endorse leader Xi Jinping’s vision for heavy investment in strengthening China’s self-sufficiency in advanced technologies.
Featured Image: Freepik @ wirestock
