Nasdaq declines as warning from chipmaker Micron reignites tech downturn

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Last Updated on August 10, 2022 by Bitfinsider

The Nasdaq fell on Tuesday as investors awaited U.S. inflation data that would prompt the Federal Reserve to tighten its attempts to control inflation further in light of Micron Technology’s gloomy prediction, which sent chip makers and tech companies lower.

Following last week’s disastrous jobs report, high inflation statistics on Wednesday would probably prevent the Fed from slowing interest rate hikes any time soon and derail the market’s recovery from its mid-June lows.

The Fed is expected to increase rates by 75 basis points in September, which would be its third consecutive significant increase, according to traders.

Data released on Tuesday indicated an increase in unit labor expenses in the second quarter, raising more concerns about a tight labor market and out-of-control inflation. This suggests that strong wage pressures will contribute to maintaining high inflation.

According to the Labor Department, unit labor costs, or the cost of labor for a single unit of output, increased at a rate of 10.8% in the second quarter after increasing at a rate of 12.7% in the first.

According to Jean Boivin, head of the BlackRock Investment Institute, the current inflation is mostly supply-driven, thus the typical central bank strategy of raising rates to stifle demand will not be as effective as prior cycles.

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

10.64 billion shares were traded on U.S. exchanges, which is lower than the 10.94 billion average for the entire session for the previous 20 trading days.

Seven of the 11 major S&P 500 sectors declined, with consumer discretionary seeing the largest fall of 1.5%. (.SPLRCD). Growth index (.IGX) fell 0.8%, while value stocks (.IVX) finished flat.

According to Chang, the jobs data from last Friday undermined some of the bullish claims that the Fed will “pivot” to a neutral position on policy, followed by rate reductions in the early part of 2019.

As demand for memory chips in PCs and smartphones declines, Micron Technology Inc (MU.Oshare )’s price fell 3.7% as a result. The memory chip manufacturer also issued a warning that its upcoming quarter will have negative free cash flow.

The Philadelphia Semiconductor index (.SOX) slumped 4.57% as a result of Micron’s poor projection, the day after Nvidia Corp (NVDA.O) warned of difficulties in its gaming industry. This was the index’s greatest one-day decline since June 16 and all 30 components were down. In the last three days, the index has dropped 7%.

A comprehensive plan with bipartisan support to give $52.7 billion in subsidies for American semiconductor manufacture and research was signed into law by President Joe Biden as a response to China’s technological investment.

Growth and technology stocks that are vulnerable to interest rates fell as US Treasury yields increased.

The benchmark S&P 500 (.SPX), which reached a record high in early January, is down 13.5% this year despite a shaky recovery as rising consumer prices, hawkish central banks, and geopolitical tensions weigh.

Corporate America has had stronger-than-expected earnings, with 77.5% of S&P 500 companies topping earnings forecasts as of Friday, per Refinitiv data.

After Berkshire Hathaway (BRKa.N), owned by Warren Buffett, boosted its holding to 20.2% of the outstanding shares, Occidental Petroleum (OXY.N) saw a 4.0% increase. This year, the price of Occidental’s shares has more than doubled.

Due to a global supply glut and weak demand, U.S. vaccine manufacturer Novavax (NVAX.O) saw a 29.6% decline after halving its annual revenue forecast. The company does not anticipate any additional sales of its COVID-19 shot in the United States this year.

On the New York Stock Exchange, declining issues outnumbered rising ones by a ratio of 1.91 to 1; on the Nasdaq, the ratio was 2.41 to 1.

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


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Disclaimer: The views and opinions expressed by the author, or any people mentioned in this article, are for informational purposes only, and they do not constitute financial, investment, legal, tax or other advice. Investing in or trading cryptocurrency or stocks comes with a risk of financial loss.

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