Major Indexes Exhibit Sharp Decline as Chip Stocks Plunge Amid Economic Worries
Date: August 1, 2024
By: Stephen Wisnefski, Executive Editor of News at Investopedia
In a turbulent trading day for financial markets, major stock indexes experienced significant drops on Thursday, largely fueled by a selloff in semiconductor stocks and growing concerns surrounding the U.S. economy. Investors are awaiting important earnings reports from major technology firms scheduled to be released after the market’s close.
Market Overview
The S&P 500 and Nasdaq Composite faced notable declines, falling by 1.4% and 2.3%, respectively. The Dow Jones Industrial Average also dropped, ending the day down 1.2%. Early trading had shown promise, as each index gained ground following recent uplifting trends during previous sessions, particularly due to a rally in chip stocks and optimism regarding a possible Federal Reserve interest rate cut as soon as next month.
Chip Stocks Retreat
Prominent chip stocks drove Thursday’s downturn, with Arm Holdings (ARM) leading the decline with a staggering 16% drop after the company issued weak earnings guidance late on Wednesday. Nvidia (NVDA), which had spearheaded a tech rally the day prior, also saw losses, plummeting nearly 7%. Other notable semiconductor companies such as Broadcom (AVGO), Qualcomm (QCOM), Advanced Micro Devices (AMD), and Micron (MU) followed suit, contributing to the market’s downward momentum.
Conversely, Meta Platforms (META) stood out among tech stock performers, surging nearly 5% after releasing better-than-expected earnings the previous evening. However, Apple (AAPL) and Amazon (AMZN), two of the giants awaiting earnings announcements, fell more than 1% leading up to their quarterly results.
Economic Indicators Raise Concerns
The volatile landscape for tech stocks reflects a broader trend in financial markets, particularly as investors rotate towards companies likely to benefit from anticipated lower interest rates. Economic data released on Thursday revealed a continual decline in manufacturing activity, with the ISM’s purchasing manager’s index indicating an even steeper contraction than anticipated. This prolonged downturn in manufacturing, ongoing for seven consecutive quarters, has observers concerned about future economic stability, especially in light of rising jobless claims reported earlier the same day.
All eyes are now turned to the monthly jobs report set to be released on Friday, which many market participants expect will shed more light on the state of employment amid shifting economic conditions.
Treasury Yields and Commodity Prices
In response to evolving market sentiments around interest rates, Treasury yields dropped on Thursday, with the yield on the 10-year Treasury note falling to 3.97%—the first time it has dipped below 4% since February. In commodities, gold reached a new record high, approaching $2,500 an ounce, whilst crude oil futures experienced a slight decline of approximately 1%.
Notable S&P 500 Movers
Among the most significant decliners in the S&P 500 on Thursday was Moderna (MRNA), which faced a staggering 21% drop after the company lowered its full-year sales guidance, citing a downturn in demand for its COVID-19 vaccine in Europe. MGM Resorts International (MGM) also faced challenges, with shares down by 13.2% after management indicated concerns regarding hotel bookings for the upcoming Formula 1 race in Las Vegas, despite reporting better-than-expected earnings.
Conversely, C.H. Robinson Worldwide (CHRW) showcased remarkable resilience, advancing 14.8% following the release of its second-quarter earnings. Other companies that experienced positive movements included FMC Corp. (FMC), which gained 10.2%, and Air Products and Chemicals (APD), which rose by 9.0% on the back of solid profit forecasts.
Conclusion
The trading environment remains fraught with uncertainty as economic indicators continue to pressurize markets, contributing to sharp retreats in key sectors like technology and semiconductors. With crucial earnings reports on the horizon and a significant jobs report looming, investors are urged to remain vigilant as they navigate this complex landscape.
Share this article:
