Wall Street Rises Despite Global Chip Slump as Oil Prices Ease
The S&P 500 added 0.2% but the modest move masked big swings underneath the surface. The Dow Jones Industrial Average jumped 537 points (1%) while the Nasdaq composite slipped 0.2% after briefly dropping 9.3% below its record set last month.
In the oil market, the price for a barrel of Brent crude to be delivered in October fell 4.4% to settle at $82.08. It?s been falling since late last week, when the price for a barrel to be delivered in September briefly shot as high as $102. The drop in oil prices helped push traders to trim their bets that the Federal Reserve could announce a hike to interest rates following its latest meeting on Wednesday. They?re forecasting a 31.5% probability, down from more than 36% a day before, according to data from CME Group. Higher rates could keep a lid on inflation, but they would also slow the economy by making it more expensive for U.S. households and businesses to borrow. Long-term mortgage rates have already hit their highest level in nearly a year, chilling the housing industry.
Coca-Cola climbed 5% after its revenue rose 7% despite what CEO Henrique Braun called ?a dynamic consumer landscape.? Sherwin-Williams rallied 8.3% and Illinois Tool Works rose 3.6% after both likewise reported stronger earnings for the latest quarter than analysts expected. Stock prices generally follow the trend of corporate profits over the long term, and expectations are high for this most recent round of reports with the U.S. stock market still near its all-time high.
Micron Technology?s stock came into the day having more than tripled for the year following gangbuster growth. Micron dropped 8.9% and was the heaviest weight on the S&P 500. Others also helping to keep the market in check were Advanced Micro Devices, down 8.1%, and Applied Materials, down 7.8%. The losses for chip stocks were even worse earlier in the day in other markets worldwide. Sharp drops for SK Hynix and Samsung Electronics dragged South Korea?s Kospi index down 10.8%. The market?s losses were so big that trading was temporarily halted at times in Seoul.
Asian technology stocks extended their sell-off on Wednesday, with semiconductor names leading declines after another weak session in the U.S. Mainland China?s tech-heavy ChiNext 300 index lost 1.83% while the Hang Seng China Semiconductor Chips Index fell more than 5%. Japan?s chip names also declined. Japan?s computer memory manufacturer Kioxia was down 10%. Tokyo Electron fell 8.5%, while SoftBank Group, a major AI investment proxy through its stake in Arm, lost more than 7%. In South Korea, SK Hynix slid more than 10% after the chip giant missed analysts? estimates despite posting record quarterly profit and revenue. Samsung Electronics lost over 4% while LG Innotek fell 9% and Seoul Semiconductor dropped over 6%.
Lower oil prices helped to ease Treasury yields in the bond market. The yield on the 10-year Treasury fell to 4.60% from 4.65% late Monday. A weaker-than-expected reading on confidence among U.S. consumers also weighed on yields. Fewer consumers are saying they feel good about current business conditions, according to the latest survey released by the Conference Board Tuesday.
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