Key Takeaways:
The Nasdaq 100 extended its decline to 1% intraday on Monday as a deepening selloff in semiconductor stocks erased early gains and dragged the broader tech sector lower.
The tech-heavy index pared losses after falling as much as 2.4% earlier in the session, while the Philadelphia Stock Exchange Semiconductor Index dropped 2.9%. The S&P 500 slipped 0.45% to 7,503.85, and the Dow Jones Industrial Average gave up an early record high to close 131 points lower at 52,925.15.
"The selloff reflects a market where expectations have run ahead of fundamentals, and the bar for earnings beats is now extremely high," said Mike Bailey, director of research at FBB Capital Partners. "I would expect the rotations we've seen to continue."
The semiconductor rout was broad-based. Micron Technology Inc. fell 4.7%, Advanced Micro Devices Inc. dropped more than 5%, and Intel Corp. declined 7.9%. The VanEck Semiconductor ETF (SMH) lost more than 3%. The selling pressure originated in Asia after Samsung Electronics Co. reported a jump in second-quarter profit that still failed to satisfy investors, sending its shares down nearly 7% and dragging South Korea's Kospi index almost 5% lower.
Oil surge adds to inflation fears
Adding to the downbeat tone, oil prices climbed after Iran attacked a Qatari liquefied natural gas tanker near the Strait of Hormuz. Brent crude futures settled 3% higher at $74.16 a barrel, while West Texas Intermediate gained almost 3% to $70.44. The rally in crude reignited concerns about inflation persistence, reinforcing the hawkish shift signaled in the Federal Reserve's June meeting minutes, which showed several officials questioned whether current policy is restrictive enough.
The cross-asset impact was evident across markets. The U.S. dollar strengthened as traders priced in a higher-for-longer rate environment, while gold slipped as the rate-sensitive metal faced headwinds from a stronger greenback. The 10-year Treasury yield edged higher, adding pressure on growth stocks that are most sensitive to discount rate changes.
SpaceX, which joined the Nasdaq 100 on Monday after becoming eligible under revised index rules, tumbled more than 6% in its first day as a constituent. The decline came despite a flurry of bullish analyst initiations from Wall Street firms including Morgan Stanley and Raymond James.
"The reaction to Samsung speaks to one of the biggest risks facing markets over the coming weeks," said Adam Crisafulli of Vital Knowledge. "Second-quarter earnings results are likely to be quite robust on an absolute basis, but unlike with the first-quarter season, expectations are presently very bullish, which means the bar is quite elevated."
Traders are now looking ahead to the U.S. consumer price index report due next week, which will provide the next major test for whether inflation is cooling enough to allow the Fed to hold rates steady — or whether the hawkish minority pushing for a hike gains more support.
This article is for informational purposes only and does not constitute investment advice.
