Tech Drops On China Restriction Fears – US Market Wrap

The world’s largest technology companies got hammered as concern about tighter US restrictions on chip sales to China spurred a selloff in the industry that has led the bull market in stocks.

Chipmakers faced intense pressure everywhere, from the United States to Europe and Asia. American powerhouses Nvidia, Advanced Micro Devices, and Broadcom pushed a widely watched semiconductor index down about 7%, the highest since 2020. Across the Atlantic, ASML Holding NV fell more than 10% despite the Dutch major reporting solid orders. Tokyo Electron drop drove the Nikkei 225 Stock Average lower.

Wednesday’s action was consistent with a previous trend in which capitalization-weighted indices underperformed the typical stock due to weakness in the megacaps that dominate them. With companies like Apple Inc. and Microsoft Corp. accounting for 7% of the S&P 500, losses are difficult to counterbalance even when the majority of the index’s components are rising, as they are today.

The Biden administration told allies it’s considering severe curbs if companies like Tokyo Electron and ASML keep giving China access to advanced semiconductor technology. The US is also weighing more sanctions on specific Chinese chip firms linked to Huawei Technologies.

The S&P 500 index lost 1.4%. The Nasdaq 100 has its worst day since 2022. A measure of the “Magnificent Seven” largest corporations fell 3.4%. The Russell 2000 index of small enterprises fell 1.1%. Wall Street’s fear guage, the VIX, reached its highest level since early May.

The bond market saw small moves. The Federal Reserve’s Beige Book showed slight economic growth and cooling inflation. The most- notable speaker on Wednesday was Governor Christopher Waller, who said the Fed is getting “closer” to cutting rates, but is not there yet. The yen led gains in major currencies, up almost 1.5%.