Oil prices dropped and the Iran conflict went on hold, but that was not enough to keep the Nasdaq Composite and S&P 500 indices from slipping on Monday.
Chip stocks lost ground as the week began, falling from a recent rally. Those same chip stocks were climbing last week on news that crude oil prices were down, but an even further dip in oil prices on Monday did not keep chip stocks from losing their rally.
The Nasdaq lost 0.66% while the S&P 500 fell 0.36%. Meanwhile, the Dow ticked up 0.14%. Among falling chip stocks, the biggest losers included Advanced Micro Devices (AMD), Teradyne (TER), and VanEck Semiconductor ETF (SMH), which fell 8%, 6%, and 3%, respectively.
Semiconductor Losses Mount
The chip sector experienced sharp losses on Monday, destroying days of gains and dropping the stock values even lower than they were before the rally in some cases. The culprit is most likely fluctuating investor sentiment. Analysts and shareholders alike continue to fear aggressive spending and low profitability from leading chipmakers.
Micron Technology (MU) was among those that posted severe losses, with a drop of 6%. Like other chip stocks, MU has been through intense fluctuations in the past few weeks caused by rapidly changing investor sentiment. However, Monday’s decline is unexpected since oil prices are still dropping. Brent crude oil fell more than 4% for the day, and West Texas Intermediate fell 7.5% in one of the biggest daily declines the market has seen in a long time.
Semiconductor companies are up against fierce competition, and the quickly growing market is facing product shortages that are driving prices incredibly high. The volatile market is rife with fluctuations, and some of those can be unpredictable when no one can say how long the market’s rapid growth is going to last. Product markets remain tight as major companies spend billions to keep up with their competitors and report only mild profits from quarter to quarter.
Timothy St. John
Financial Writer – European & US Desks
www.fxleaders.com