Stocks Get Hit Amid Selloff in Global Chipmakers: Markets Wrap

(Bloomberg) — Stocks fell from all-time highs as potentially tougher US restrictions on global chip sales to China spurred a rout in the industry that has powered the bull market.

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The $24 billion VanEck Semiconductor exchange-traded fund lost 4%. Nvidia Corp., Advanced Micro Devices Inc. and Broadcom Inc. tumbled. ASML Holding NV sank 8%, even after the Dutch company reported strong orders in the second quarter. Tokyo Electron Ltd. led a slide in Japan’s Nikkei 225 Stock Average.

The Biden administration has told allies that it’s considering using the most severe trade restrictions available if companies such as Tokyo Electron and ASML continue giving China access to advanced semiconductor technology. The US is also weighing additional sanctions on specific Chinese chip companies linked to Huawei Technologies Co.

“Normally, the impact of these types of headlines isn’t long-lasting, but in this case, we would note that semis have been underperforming the broader market for the last couple of weeks now, so that’s something to watch,” said Bespoke Investment Group strategists.

Still, the move in stocks represents a small pullback after a stellar run of gains, fueled by soft inflation data and optimism that the Federal Reserve will cut interest rates. Fed Governor Christopher Waller said the economy is getting closer to a point where the central bank can reduce borrowing costs but indicated he’d like to see a “bit more evidence” inflation is on a sustained downward path.

The S&P 500 fell 1%, while the Nasdaq 100 dropped almost 2%. The Russell 2000 of small caps rose 0.6%. Treasury 10-year yields advanced two basis points to 4.17%. The dollar fell against all of its developed-market peers, with the yen up almost 1.5%.

The summer correction is close at hand with US stocks expected to fall on weak seasonality and stretched positioning, according to Goldman Sachs Group Inc.’s global markets division managing director and tactical specialist Scott Rubner.

Today, historically marks the peak for S&P 500 returns in data going back to 1928 to be followed by the worst month for equity outflows — August, he said.

“The pain trade is no longer higher from here. I am not buying the dip,” he wrote.

Corporate Highlights:

Tesla Inc. forming an autonomous taxi platform will be the catalyst for a roughly 10-fold increase in its share price, Ark Investment Management LLC’s Cathie Wood said, echoing years of bullish predictions about a business the carmaker has yet to stand up.
Boeing Co.’s largest union is holding a rally and strike-sanction vote on Wednesday, ratcheting up pressure on company negotiators as contract talks enter a crucial phase ahead of a potential walkout in September.
Amazon.com Inc.’s marketing portal for merchants crashed Tuesday night, according to multiple Amazon sellers and consultants, fouling up one of the online retailer’s biggest sales of the year.
Johnson & Johnson’s second-quarter profit beat Wall Street projections on strong pharmaceutical sales while the company cut its full-year forecast to account for a spate of recent acquisitions.
Roche Holding AG’s experimental weight loss pill showed meaningful weight reduction in an early stage study among obesity patients, setting up the Swiss drugmaker as a challenger in the field.
Spirit Airlines Inc. said second-quarter revenue will be lower than expected and that operating losses will be worse due to competitive pressure on baggage fees and other non-ticket charges.

Key events this week:

ECB rate decision, Thursday
US initial jobless claims, Philadelphia Fed manufacturing, Conference Board LEI, Thursday
Fed’s Mary Daly, Lorie Logan and Michelle Bowman speak, Thursday
Fed’s John Williams, Raphael Bostic speak, Friday

Some of the main moves in markets:

Stocks