Stocks faced a challenging day, experiencing a downturn primarily triggered by a lackluster forecast from Europe’s top tech giant and rising concerns regarding imminent US restrictions on chip sales. This sell-off particularly affected the semiconductor industry, which has significantly contributed to the ongoing bull market.
Equities pulled back from record highs, with the S&P 500 declining nearly 1% and the Nasdaq 100 dropping 1.4%. A key index for semiconductor stocks marked its steepest decline since early September, highlighting the mounting pressure on this essential sector. Shares of ASML Holding NV, a leading Dutch semiconductor manufacturer, plummeted 16% following a reduction in its revenue projections for 2025. Additionally, Nvidia Corp. fell 4.5% amid reports that US authorities were contemplating limitations on the sale of advanced AI chips to certain nations.
Investor sentiment has shifted notably, as a Bank of America survey indicated a rising number of participants are considering reallocating their portfolios, shifting away from equities. As appetite for stocks surged, cash levels in global investment portfolios decreased to an unprecedented 3.9% this October, down from 4.2% the previous month. This shift has triggered a “sell signal” based on market performance metrics.
Dan Wantrobski from Janney Montgomery Scott remarked on the profit-taking occurring in US equity markets, particularly as the earnings season gains momentum and the market becomes overextended on technical charts.
The S&P 500 settled around 5,815, while the Dow Jones Industrial Average fell by 0.8%. A noticeable decline of 8.1% marked UnitedHealth Group Inc.’s stock as it adjusted its outlook downward. However, optimism was seen with Bank of America Corp., whose earnings exceeded expectations, while Citigroup Inc. faced a downturn despite reports that met analyst targets.
As part of the market adjustments, Treasury yields for 10-year notes decreased by seven basis points, settling at 4.03%. Meanwhile, the US dollar strengthened, and oil prices tumbled after Israel signaled a potential ceasefire on operations that threatened oil supplies from Iran.
Recent data from Citigroup indicated substantial week-over-week flows into the S&P 500, nearing peak levels for the year. Market positioning appears highly extended, sitting at the 98th percentile, raising concerns about inflated valuations amid the current bullish trend.
Despite these challenges, experts like Jonathan Golub and Patrick Palfrey from UBS Group AG have amplified their year-end projections for the S&P 500, revising it upwards to 5,850 from 5,600 while enhancing their 2025 outlook to 6,400 from 6,000. They cite moderating inflation, potential rate cuts, and improvements in consumer and business activity as catalysts for ongoing market strength.
Goldman Sachs strategist Scott Rubner believes the rally for US stocks could persist well into the year’s final quarter, with expectations for the S&P 500 to surpass the 6,000 mark as corporate buyers return and institutional investors adjust their hedging strategies.
Among the corporate highlights recently reported, Johnson & Johnson showcased better-than-expected earnings for the third quarter, bolstered by robust sales of its cancer treatment Darzalex. Charles Schwab Corp. surpassed analyst projections while managing to reduce its costly debt, indicating the firm has successfully navigated past previous turbulence. Meanwhile, PNC Financial Services Group Inc. reported stronger-than-anticipated net interest income, forecasting a record performance for the upcoming year.
In contrast, Walgreens Boots Alliance Inc. announced plans to close 14% of its US stores due to declining consumer spending. Furthermore, PG&E Corp. is preparing for potential power outages across California in response to anticipated dry, wind-driven weather conditions. Notably, LVMH reported a decline in fashion and leather goods sales for the first time since the pandemic, primarily due to waning demand from previously eager Chinese consumers. Meanwhile, Adidas AG raised its annual profit forecast for the third consecutive quarter, driven by continued popularity for retro sneakers and sales from its diminishing stockpile of Yeezy products.
Upcoming critical events include Morgan Stanley’s earnings report on Wednesday, the European Central Bank’s rate decision on Thursday, and US retail sales along with jobless claims and industrial production data to be released later that day. Market watchers will also be keeping an eye on GDP figures from China and US housing starts, with notable speeches from Federal Reserve officials scheduled for Friday.
In terms of market movements:
- The S&P 500 has declined by 0.8%, standing at 5,815.26.
- The Nasdaq 100 dropped 1.4% to 18,315.59.
- The Dow Jones Industrial Average fell by 0.8%, settling at 42,740.42.
- The MSCI World Index decreased by 0.7%.
Currency movements reflect the following trends:
- The dollar’s value has increased, represented by a 0.2% rise in the Bloomberg Dollar Spot Index.
- The euro slipped by 0.2% against the dollar, now at $1.0887.
- The Japanese yen strengthened by 0.4% to trade at 149.21 per dollar.
In the cryptocurrency market, Bitcoin has risen by 1.6% to $66,979.55, while Ether has seen a slight decrease of 1.1%, priced at $2,591.82.
Bond yields have experienced a downward trend, with the yield on 10-year Treasuries decreasing by seven basis points to 4.03%, while German and British bonds saw similar declines.
In commodities, West Texas Intermediate crude oil witnessed a 3.9% drop, trading at $70.92 a barrel, whereas spot gold appreciated by 0.5%, reaching $2,662.01 an ounce.
This analysis reveals a complex interaction of market forces, investor sentiment, and external economic factors shaping the current financial landscape, underscoring the necessity for careful vigilance among traders and analysts alike.