Mixed Market Performance as Semiconductor Stocks Retreat Amid AI Concerns

The S&P 500 Index ($SPX) (SPY) rose by 0.10%, while the Dow Jones Industrial Average ($DOWI) (DIA) climbed 0.85%. Conversely, the Nasdaq 100 Index ($IUXX) (QQQ) declined 0.92%. In the futures market, September E-mini S&l P 500 futures (ESU26) edged up 0.08%, while September E-mini Nasdaq futures (NQU26) fell 1.03%.

US equity markets showed mixed results today, with the S&P 500 reaching a two-week high and the Dow Jones Industrial Average hitting a new all-time peak. Market sentiment received a boost from cooling labor data; a slower-than-anticipated increase in nonfarm payrolls drove bond yields lower, fueling speculation that the Federal Reserve may pause interest rate hikes. While June’s hiring numbers slowed and May’s figures were revised downward, the unemployment rate unexpectedly dipped to a one-year low.

Despite these gains, the Nasdaq 100 remained in negative territory as chipmakers and AI infrastructure stocks continued their two-day slide. This-sector weakness follows a significant drop in South Korean markets, where the Kospi Index fell over 7% to a three-week low, driven by concerns regarding the long-term sustainability of the AI boom. These fears were exacerbated by reports from Meta Platforms regarding the potential sale of computing power, raising questions about excess capacity in the AI sector.

Economic data revealed that June nonfarm payrolls rose by 57,000, missing the anticipated 113,000. May’s figures were also revised down to 129,000 from an initial 172,000. However, the June unemployment rate fell unexpectedly to 4.2%, outperforming expectations of 4.3%. Average hourly earnings rose 0.3% month-over-month and 3.5% year-over-year, aligning with forecasts. Additionally, weekly initial jobless claims fell to 215,000, lower than the expected increase to 218,000.

In manufacturing, May factory orders fell 1.3%, which was less severe than the expected 2.0% decline. Notably, factory orders excluding transportation rose 1.9%, surpassing the 1.0% forecast and marking the strongest monthly increase in over four years.

Investor optimism remains supported by strong Q2 earnings expectations. Bloomberg Intelligence suggests corporate earnings could grow by 23%, following a robust Q1. AI-related spending is expected to be a primary driver, with infrastructure-related stocks projected to contribute nearly 60% of the S&P 500’s earnings-per-share growth for the quarter.

In commodities, WTI crude oil (CLQ26) dropped more than 1%, hitting a 4.25-month low amid rising global supply. Shipments from the United Arab Emirates increased by 30% in June, while increased commercial shipping through the Strait of Hormuz has also bolstered oil flows.

Current market pricing suggests a 20% probability of a 25 basis point rate hike at the upcoming FOMC meeting scheduled for July 28-29.

International markets showed strength; the Euro Stoxx 50 rose 1.46% to a new high, China’s Shanghai Composite gained 0.4%, and Japan’s Nikkei-225 increased by 0.59%.

Interest Rates

September 10-year T-notes (ZNU6) saw a slight uptick, while the 10-year T-note yield retreated to 4.471%. Treasury yields moved lower following the soft labor market data and falling crude oil prices, which helped ease inflation concerns. In Europe, the 10-year German bund yield rose to 2.905%, and the 10-year UK gilt yield reached 4.779%. In Italy, the unemployment rate unexpectedly fell to a record low of 5.0%. Meanwhile, Bank of England Governor Andrew Bailey indicated that interest rate cuts are not currently on the table.

US Stock Movers

Software companies provided a lift to the broader market, with Palantir Technologies (PLTR) rising over 3% following an upgrade, and Adobe (ADBE) gaining more than 3% after a positive analyst revision. Other gainers included Autodesk (ADSK), Intuit (INTU), and Workday (WDAY). In the mining sector, gold and silver price surges pushed stocks like Coeur Mining (CDE) up over 5%, alongside gains for Hecla Mining (HL) and Barrick Mining (B).

The semiconductor-led sell-off weighed heavily on the indices. The iShares Semiconductor ETF (SOXX) tumbled more than 3%, with major losses seen in SanDisk (SNDK), KLA Corp (KLAC), Lam Research (LRCX), and Applied Materials (AMAT). Advanced Micro Devices (AMD) and Intel (INTC) also faced significant-selling pressure.

Other notable moves included AeroVironment (AVAV) jumping over 9% following a significant US Army contract award, and Apple (AAPL) gaining more than 4% amid reports of increased foldable iPhone production targets. Conversely, Jabil Inc (JBL) fell more than 5% following the announcement of a new debt offering.

Earnings Reports

Lindsay Corp (LNN) and National Beverage Corp (FIZZ) are scheduled to report earnings.

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