Market Decline Led by Semiconductor Sector Weakness as Tech Stocks Fall

U.S. stock markets declined on Thursday, with the S&P 500 (^SPX) falling 0.54%, the Dow Jones Industrial Average (^DJI) dropping 0.42%, and the Nasdaq 100 (^IXIC) retreating 1.38%. September E-mini S&P futures (ESU2) were down 0.51%, while September E-mini Nasdaq futures (NQU2) fell 1.34%. The indices reached their lowest levels in two weeks, pressured by weakness in semiconductor stocks. South Korea’s KOSPI index fell more than 5% after Samsung Electronics and SK Hynix declined, triggering a global downturn in chipmakers.

Market sentiment was further bearish following a New York Times report suggesting ChatGPT’s developer, OpenAI, may delay its initial public offering until 2027. However, strength in software stocks helped limit broader losses. WTI crude oil (CLQ2) dropped over 3%, easing inflation concerns, lowering bond yields, and supporting equity markets. Crude exports from the Persian Gulf have recovered to roughly 75% of pre-war levels, according to Bloomberg calculations.

Investor attention turned to monetary policy, with markets pricing in a 30% chance of a 25 basis point rate hike at the Federal Reserve’s July 28-29 meeting. US wholesale inventories rose 0.3% in May, below the expected 0.4% gain, while retail inventories increased 0.6%, exceeding forecasts of 0.5%.

Global markets also slipped, with the Euro Stoxx 50 down 0.88% and China’s Shanghai Composite falling 2.26% to a two-week low. Japan’s Nikkei-225 plunged 4.15%. In the bond market, September 10-year T-notes (ZNU6) rose 2 ticks, pushing the 10-year yield down 0.8 basis points to 4.385%, supported by lower oil prices and safe-haven demand. European bond yields showed mixed moves, with Germany’s 10-year bund yield falling to 2.855% and the UK’s 10-year gilt yield rising 5.8 basis points to 4.758%. The ECB’s May inflation expectations eased, with one-year CPI expectations dropping to 3.5% from 4.0%, while three-year expectations remained steady at 2.9%.

Equity Movers

Semiconductor and artificial intelligence infrastructure stocks led the decline, weighing heavily on the market. Sandisk (SNDK) dropped more than 8%, while Western Digital (WDC) fell over 7%. Chip equipment and storage companies including Lam Research (LRCX), Seagate (STX), Applied Materials (AMAT), Marvell (MRVL), Micron (MU), Arm (ARM), Analog Devices (ADI), Intel (INTC), Microchip (MCHP), and KLA Corp (KLAC) fell between 4% and 5%. Additional decliners included AMD (AMD), ASML (ASML), and Texas Instruments (TXN), down roughly 3%.

Conversely, software stocks posted strong gains, helping cushion market losses. ServiceNow (NOW) rose more than 6%, leading S&P 500 advancers, while Workday (WDAY) gained over 4% and Salesforce (CRM) added roughly 4%, pacing Nasdaq 100 and Dow Jones Industrial gains respectively. Other software leaders included Atlassian (TEAM), Palantir (PLTR), Intuit (INTU), Adobe (ADBE), Autodesk (ADSK), and Datadog (DDOG), up between 2% and 4%.

Specialty stocks showed mixed results. Quantum Corp (QMCO) tumbled 21% after Northland Securities downgraded the company. ON Semiconductor (ON) fell 19% following its agreement to acquire Synaptics for approximately $6.2 billion in an all-stock transaction. On the upside, Acadia Pharmaceuticals (ACAD) jumped 9% after the European Medicines Agency backed its Rett syndrome treatment, while Wise Group (WSE) and Nutex Health (NUTX) each rose over 5% on new buybacks and analyst coverage respectively.

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