The US equity markets experienced a downturn after midday on Thursday as results from Taiwan Semiconductor Manufacturing Company ($TSM) fell short of reigniting enthusiasm among semiconductor investors, coinciding with rising jobless claims that exceeded prior forecasts. The Nasdaq Composite Index decreased by 0.5%, settling at 17,899.3, while the S&P 500 also fell by 0.5% to 5,562.6, and the Dow Jones Industrial Average saw a 0.7% reduction, closing at 40,910.6.
Notably, sectors such as healthcare and technology witnessed significant declines, whereas real estate emerged as one of the few gainers amidst the broader market pullback. In the latest quarterly results, Taiwan Semiconductor reported earnings for Q2 that outperformed analysts' expectations in terms of sales.
However, despite this positive news, the shares of the Taiwanese chip manufacturer were impacted by geopolitical tensions, leading to a decline in intraday trading. Of the five semiconductor industry giants boasting market capitalizations exceeding $200 billion, only Nvidia ($NVDA) managed to see gains during that trading session.
The previous day, Wednesday, marked a particularly challenging time for the Nasdaq, which experienced its steepest decline since 2022, plummeting by 2.8% due to a significant sell-off in chip stocks. This sell-off followed reports indicating that the US government might impose stricter export restrictions on semiconductor technology, as highlighted in a note from financial services firm D.A.
Davidson. This week’s market trends suggest the technology sector is likely to register the sharpest descent, while real estate may reflect the strongest gains, illustrating a strategic shift among investors as they anticipate monetary policy easing in September while maneuvering through potential geopolitical pitfalls.
Attention is also focused on monetary policy, with key remarks expected from Federal Reserve officials such as San Francisco Fed President Mary Daly and Fed Governor Michelle Bowman, who both hold voting rights on the Federal Open Market Committee this year. According to data from the FedWatch Tool, investors are assigning a 94% probability to an interest rate cut slated for September.
On the economic front, initial claims for unemployment in the US rose to 243,000 for the week ending July 13, increasing from a downwardly revised 223,000 the previous week. This latest figure exceeds the anticipated rate of 229,000, based on a survey conducted by Bloomberg analysts. Additionally, the four-week moving average for jobless claims edged up by 1,000, bringing it to 234,750.
In a broader economic outlook, the Conference Board’s leading economic index (LEI) dipped by 0.2% in June, contrasting with the expected decrease of 0.3% and showing a slightly smaller contraction than the 0.4% decline noted for the previous month, May. In manufacturing, the Philadelphia Federal Reserve’s monthly manufacturing index showed a bright spot, increasing to 13.9 in July after averaging a mere 1.3 in June, thus surpassing the anticipated figure of 2.9 in a Bloomberg survey.
This improvement indicates a brisker pace of growth within the sector. Further analyzing bond markets, the yield on the US 10-year Treasury rose by 3.7 basis points to hit 4.18%, while the yield on the two-year Treasury increased by 1.9 basis points to reach 4.45%. In corporate news, Domino's Pizza ($DPZ) enjoyed a year-over-year boost in its second-quarter performance, although the pizza chain has suspended its long-term projections for global net store growth.
Consequently, its shares tumbled nearly 14% during intraday trading, marking it as the worst performer on the S&P 500. Conversely, D.R. Horton ($DHI) witnessed a surge in its shares, soaring over 11% intraday in response to the company’s reassuring fiscal Q3 performance, which exceeded market expectations.
Meanwhile, crude oil prices rose modestly, with West Texas Intermediate climbing by 0.7% to settle at $83.39 per barrel. In the commodities market, gold experienced a slight retreat, falling less than 0.1% to a rate of $2,458.30 per ounce, while silver diminished by 0.5% to reach $30.23 an ounce..