Wall Street Falls as Treasury Yields Rise After Strong Sales Data, Chipmakers Slide
Wall Street’s main indexes fell on Tuesday as Treasury yields rose following hotter-than-expected economic data, while chipmakers fell after the Biden administration said it was halting shipments of AI chips to China.
U.S. retail sales rose 0.7% in September, exceeding estimates of a 0.3% rise. This increase was driven by higher purchases of motor vehicles and spending at restaurants and bars, suggesting a strong end to the third quarter for the economy.
“This is a persistent story … you can never bet against the U.S. consumer, and this is evidence of it,” said Thomas Hayes, chairman at Great Hill Capital.
As a result of the data, U.S. Treasury yields continued to rise, pressuring megacaps Apple, Microsoft, Alphabet, and Amazon.com.
Nvidia also experienced a dip of 6.8% after the Biden administration announced plans to halt shipments of advanced artificial intelligence chips to China.
Other chip stocks, including Advanced Micro Devices, Marvell Technology, Qualcomm, and Arm Holdings, also fell.
The Dow Jones Industrial Average dropped 3% to reach a near two-week low.
Bank Earnings and Middle East Conflict
Bank of America gained 0.5% as it joined rivals in earning more from interest payments by its customers. Meanwhile, Goldman Sachs reported a third-quarter profit drop that was less than expected.
“People continue to underestimate the strength of the economy, they continue to underestimate the strength of the consumer and there’s nowhere better to reflect that than in bank earnings which have just been off the charts,” Hayes added.
Investors also kept a close eye on the conflict in the Middle East as Iran’s Supreme Leader Ayatollah Ali Khamenei called for an immediate end to Israel’s actions in the Gaza Strip. This raised concerns that the conflict could escalate.
U.S. President Joe Biden is scheduled to visit Israel, and Washington has announced that humanitarian aid will be allowed to reach Gazans.
Market Movement and Individual Stocks
Information technology and consumer discretionary sectors led the declines in the S&P 500, while energy and materials advanced.
Among individual stocks, Dollar Tree rose 2.5% after Goldman Sachs upgraded its shares to “buy” from “neutral”. On the other hand, cloud computing firm VMware fell 8.8% due to uncertainty surrounding China’s approval of Broadcom’s $61 billion deal for the company.
Declining issues slightly outnumbered advancers on the NYSE, while advancers outnumbered decliners on the Nasdaq.
The S&P index recorded new 52-week highs and lows, as did the Nasdaq.
