Nasdaq closes lower as chipmaker Micron’s warning renews tech rout

  • Micron stumbles on lower revenue forecasts
  • Semiconductor stocks drop for third session
  • Novavax plummets after halving revenue

NEW YORK, Aug 9 (Reuters) – The Nasdaq closed on Tuesday after a dismal forecast from Micron Technology dragged chipmakers and tech stocks lower as investors await inflation data in the United States that could lead the Federal Reserve to further tighten its efforts to curb inflation.

High inflation numbers on Wednesday, following last week’s jobs blast report, would likely prevent the Fed from easing interest rate hikes anytime soon and halt the market rally by from the mid-June lows.

Traders see a 68.5% chance that the Fed will raise rates by 75 basis points in September, in what would be its third big hike in a row.

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Adding to concerns of a tight labor market and runaway inflation, Tuesday’s data showed an acceleration in unit labor costs in the second quarter, suggesting that strong wage pressures will help sustain growth. inflation at a high level. Read more

Unit labor costs – the price of labor per unit of output – rose at a rate of 10.8%, following a 12.7% growth rate in the first quarter, the Labor Department said. .

“We’re still seeing increasing wage pressure, using last Friday’s employment data as a gauge,” said Jimmy Chang, chief investment officer at Rockefeller Global Family Office.

Chang remains cautious about the market outlook. “I don’t think it’s going to be a set of numbers that will change the course of Fed policy,” he said.

Inflation right now is mostly supply-driven, so the central bank’s traditional playbook of tightening rates to crush demand won’t be as effective as previous cycles, Jean Boivin said. director of the BlackRock Investment Institute.

“We are going to see central banks being surprised by inflation. They will have to appear hawkish because of this,” Boivin told the Reuters Global Markets Forum.

The Dow Jones Industrial Average (.DJI) fell 58.13 points, or 0.18%, to 32,774.41, while the S&P 500 (.SPX) lost 17.59 points, or 0.42% , to 4,122.47 and the Nasdaq Composite (.IXIC) fell 150.53 points, or 1.19%, to 12,493.93.

Volume on U.S. exchanges was 10.64 billion shares, compared to an average of 10.94 billion for the full session over the past 20 trading days.

Seven of the 11 major S&P 500 sectors fell, led by a 1.5% decline in consumer discretionary (.SPLRCD). Value stocks (.IVX) closed flat, while the growth index (.IGX) slipped 0.8%.

Last Friday’s jobs data eroded some of the bullish arguments that the Fed would “pivot” to neutral policy, followed by rate cuts early next year, Chang said.

“You have strategists and technicians capitulating, saying the bottom is behind us, it’s a new bull market now,” he said. “Typically in a bear market, a summer rally is not unusual.”

Micron Technology Inc (MU.O) fell 3.7% after the memory chipmaker cut its revenue forecast for the current quarter and warned of negative free cash flow in the next quarter as demand for chips in PCs and smartphones is declining. Read more

Cumulative performance since the beginning of the year

Micron’s gloomy forecast, a day after Nvidia Corp warned of weakness in its gaming business, sent the Philadelphia Semiconductor Index (.SOX) down 4.57%, its most sharp one-day decline since June 16 as all 30 components fell. The index has lost 7% over the past three days.

President Joe Biden signed a sweeping bill providing $52.7 billion in subsidies for U.S. semiconductor production and research, a move that won bipartisan support to curb Chinese investment in technology. Read more

“It’s totally discounted,” said Marketfield chief executive Michael Shaul, explaining why chip stocks weren’t impressed with the bill.

Rate-sensitive growth and technology stocks fell as US Treasury yields rose.

Despite a choppy recovery, the benchmark S&P 500 (.SPX) is down 13.5% this year after hitting a record high in early January as soaring consumer prices, hawkish central banks and geopolitical tensions weigh.

Stronger-than-expected earnings for U.S. companies were positive, with 77.5% of S&P 500 companies beating earnings estimates, according to Refinitiv data as of Friday.

Occidental Petroleum (OXY.N) rose 4.0% after Warren Buffett’s Berkshire Hathaway (BRKa.N) increased its stake to 20.2% of outstanding shares. Occidental shares have more than doubled in price this year. Read more

US vaccine maker Novavax (NVAX.O) fell 29.6% after halving its annual revenue forecast as it does not expect further sales of its COVID-19 shot this year in the States States in a context of global supply glut and weak demand. Read more

Falling issues outnumbered rising ones on the NYSE by a ratio of 1.91 to 1; on the Nasdaq, a 2.41-to-1 ratio favored decliners.

The S&P 500 posted four new 52-week highs and 30 new lows; the Nasdaq Composite recorded 42 new highs and 66 new lows.

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Reporting by Herbert Lash in New York and Bansari Mayur Kamdar in Bangalore; Additional reporting by Aniruddha Ghosh in Bengaluru; Editing Arun Koyyur, Shounak Dasgupta and Lisa Shumaker

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