On Wednesday, US equity indexes experienced mixed trading dynamics following a notable sell-off in semiconductor stocks, directly affecting the Nasdaq Composite and the S&P 500. The Nasdaq Composite plummeted by 2.7%, landing at a value of 18,010.1, while the Dow Jones Industrial Average managed a rise of 0.5% to 41,148.2.
The S&P 500 also faced a setback, dropping 1.3% to 5,591.5. This index had previously achieved an all-time high for the tenth time within the last eleven sessions, underscoring a noteworthy achievement according to insights shared by D.A. Davidson. Meanwhile, Deutsche Bank highlighted that the S&P 500 has witnessed gains in 28 out of the last 37 weeks, marking its longest winning streak in 35 years. According to a report from Bloomberg referenced in the D.A.
Davidson note, the US government is contemplating the introduction of a foreign direct product rule. This rule could empower the US to enforce controls on foreign-manufactured products that contain even a minimal amount of American technology, particularly targeting semiconductor chips produced in China. ASML, identified by the ticker symbol $ASML, is poised to face the most stringent US trade restrictions should it continue to provide China with access to cutting-edge semiconductor technology.
This revelation surfaced in a Bloomberg report late Tuesday, which cited sources familiar with ongoing discussions. Consequently, ASML shares suffered a significant drop, plummeting almost 12% intraday, marking the most substantial decline on the Nasdaq for the day. Meanwhile, shares of Taiwan Semiconductor Manufacturing Co., denoted as $TSM, fell by 6.3%.
This decline followed comments made by former President Donald Trump in a Bloomberg Businessweek interview, where he suggested that Taiwan should compensate the US for its defense, implying that the territory offers the US no reciprocal advantages. The technology sector as a whole faced challenges, plummeting by 3.4% intraday, influenced heavily by major chipmakers such as Qualcomm ($QCOM), Nvidia ($NVDA), and Broadcom ($AVGO), all of which experienced declines.
Additionally, the communication services and consumer discretionary sectors also reported significant intraday downturns. On the economic front, US industrial production posted a 0.6% increase in June, surpassing initial expectations of a 0.3% rise based on a survey conducted by Bloomberg. This positive shift followed an earlier upwardly revised increase of 0.9% in May.
Housing starts in June rose by 3% compared to the previous month, achieving a seasonally adjusted annual rate of 1.353 million, significantly better than the anticipated 1.30 million according to Bloomberg’s survey. Federal Reserve Governor Christopher Waller provided insights on Wednesday during an event in Kansas City, emphasizing that incoming macroeconomic data would play a crucial role in shaping future monetary policy.
Waller pointed out the potential for multiple economic trajectories, suggesting that while price pressures remain "uneven," there is persistent improvement in managing inflation. Consequently, the timing of a possible rate cut remains uncertain. In bond markets, the yield on the US 10-year Treasury dipped slightly to 4.16%, whereas the yield on the two-year note inched up to 4.45%. In the commodities market, West Texas Intermediate (WTI) crude oil saw a significant increase of 2.3%, reaching $82.57 per barrel. Excluding Strategic Petroleum Reserve inventories, US commercial crude oil stocks experienced a decline of 4.9 million barrels for the week ending July 12, following a previous drop of 3.4 million barrels the week prior.
This decline was considerably larger than the 1.1 million-barrel decrease that analysts had predicted in a Bloomberg survey. In precious metals, gold prices fell by 0.4%, settling at $2,458.9 per ounce, while silver prices saw a sharper decline of 3.6%, reaching $30.32 per ounce..