[New York Stock Market] Decline Ahead of CPI Due to Semiconductor Earnings Warning... Nasdaq Down 1.19%

[Image source=Reuters Yonhap News]

[Asia Economy New York=Special Correspondent Joselgina] Major indices on the U.S. New York stock market closed lower across the board on the 9th (local time). This was due to a series of earnings warnings centered on semiconductor stocks amid weak demand, as investors awaited the Consumer Price Index (CPI) report to be released the following day.

On this day at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 32,774.41, down 58.13 points (0.18%) from the previous session. The S&P 500, which focuses on large-cap stocks, fell 17.59 points (0.42%) to 4,122.47, while the tech-heavy Nasdaq dropped 150.53 points (1.19%) to close at 12,493.93. The small-cap Russell 2000 index recorded a decline of 28.31 points (1.46%) to 1,912.89.

Among individual stocks, semiconductor shares showed weakness for the second consecutive day. This followed Micron lowering its earnings outlook due to continued deterioration in memory semiconductor demand, after Nvidia had downgraded its Q2 earnings guidance the previous day. Micron’s stock price fell 3.74% from the previous close. Nvidia and AMD also slid 3.97% and 4.53%, respectively. Intel dropped 2.43%.

Novavax also plunged nearly 30% after lowering its annual sales guidance due to decreased demand for COVID-19 vaccines. Upstart closed down about 12% after releasing earnings that fell short of market expectations. A cautionary note from experts regarding the meme stock frenzy continued, with Bed Bath & Beyond’s stock price dropping more than 14% as a result.

Investors are closely watching corporate earnings alongside the July CPI report to be announced the next day. They aim to confirm whether inflation has peaked and seek hints about the Federal Reserve’s future tightening pace.

According to economic media CNBC, experts expect the July CPI inflation rate to slow to 8.7%, down from over 9% the previous month. However, it remains historically high, and with last week’s July employment report significantly exceeding expectations, market sentiment is increasingly anticipating the Fed to continue aggressive tightening.

Ahead of the CPI announcement, Treasury yields rose. On this day in the New York bond market, the yield on the U.S. 10-year Treasury note climbed to 2.78%. The 2-year yield, sensitive to monetary policy, also surged, widening the spread with the 10-year yield. The inversion of short- and long-term yields, often interpreted as a recession signal, continues.

Andy Brenner of National Alliance said, “If the CPI report comes out better than expected, the yield curve could invert back, and the Fed might be less aggressive. On the other hand, if it remains in the 9% range, the market will likely solidify expectations for a 0.75 percentage point hike at the September meeting.” According to the Chicago Mercantile Exchange (CME) FedWatch tool, the federal funds futures market currently prices in a 67.5% probability of a giant step (0.75 percentage point hike) in September.

President Joe Biden signed and promulgated the ‘Chips and Science Act’ on this day, which involves massive investments in the semiconductor and science sectors. Accordingly, $280 billion (approximately 366 trillion KRW) will be invested to advance the U.S. semiconductor industry and maintain technological superiority. The market expects major beneficiaries of this legislation to include U.S. Intel, Taiwan’s TSMC, and South Korea’s Samsung Electronics.

However, the news of the semiconductor support law signing did not prevent the semiconductor stocks’ weakness in the New York market that day. Micron lowered its Q2 sales forecast due to weakening memory semiconductor demand and later warned of possible negative cash flow. The previous day, Nvidia had forecasted a 19% decrease in Q2 sales compared to the previous quarter. Earlier, AMD had also anticipated a decline in graphics semiconductor sales. Nonetheless, separately from its lowered earnings outlook, Micron announced it would invest $40 billion in building new semiconductor manufacturing facilities related to the bill’s passage.

Economic indicators were weak. Nonfarm labor productivity in Q2 fell 4.6% quarter-on-quarter. Although this is an improvement from Q1 this year, it still confirms declining productivity. The National Federation of Independent Business (NFIB) reported that the July small business optimism index rose slightly to 89.9 from 89.5 the previous month. While this is an improvement, it remains well below the 48-year average of 98.

Oil prices fell slightly. On the New York Mercantile Exchange, September West Texas Intermediate (WTI) crude oil closed at $90.50 per barrel, down 26 cents (0.29%) from the previous day.

This content was produced with the assistance of AI translation services.