A Sea of Red Sweeps Wall Street amid Tech Turmoil

Disappointing earnings, TSMC’s revised forecast for 2024 semiconductor market growth, hawkish comments from Federal Reserve officials and a retaliatory missile strike on Iran by Israel led to a third weekly loss in a row for the S&P 500.

The benchmark index dropped 3.05% for its worst week since mid-March 2023, ending below the psychologically critical 5,000 level and erasing 60% of its first-quarter gains in April. The Dow Jones Industrial Average weathered the storm with a very small gain of one basis point. The slide for big tech stocks dragged the Nasdaq composite to a U.S. market-leading loss of 5.52%, bringing its year-to-date performance to 1.80% after having nearly reached 9.5% at the end of March.

The trend in Europe was just as negative, albeit of lesser magnitude. The MSCI EMU was down 0.96% over the week while the FTSE fell 1.25%.

In Asia, Japan’s Nikkei took a nosedive, down 6.21%. Bank of Japan Governor Kazuo Ueda said on Friday that the central bank will very likely hike up the interest rates if inflation keeps increasing. He also indicated that they may begin tapering the massive bond purchases at some point in the future. In China, the Shanghai Composite was pushed higher by persistent optimism over more stimulus measures, gaining 1.52% week-over-week. By contrast, the other stock indices finished the week in negative territory. Australia’s ASX 200 index slid 2.84%, while losses in heavyweight tech stocks dragged South Korea’s KOSPI down 3.35% and Hong Kong’s Hang Seng down 2.98%. India’s Nifty 50 index tracked declines in its regional peers, with a weekly loss of 1.65%.

Worst Week for Big Tech since the COVID Crisis in March 2020    

Tech stocks had shown resilience at the beginning of the month, but the paradigm changed this week. The S&P information technology sector plunged 7.26%, its worst performance since the start of the COVID crisis in March 2020, dragged down by semiconductor stocks. 

The world’s largest chipmaker, Taiwan Semiconductor Manufacturing Co., lit the fuse after cutting its 2024 projection for the semiconductor industry. TSMC currently predicts a 10% market expansion, excluding memory chips. This is a decrease from the “more than 10%” projection it had set forth a few months ago. The TSMC stock lost 10.40% over the week even though the chipmaker had impressed with its first-quarter results, posting a 9% rise in net profit that beat market expectations.

NVIDIA (NVDA) followed suit, falling by 13.59%. This is the third component of the S&P IT index. The top two, Microsoft (MSFT) and Apple (AAPL), lost 5.40% and 6.54% over the week respectively. The information technology sector, which was one of the best performers of the year within the S&P 500 at the end of March, is now one of the worst, as shown on the bar chart below.

Despite a 3.23% drop this week, communication services remain the top performer this year. Yet Meta Platforms (META) dropped 6.02% for the week while Netflix’s stock plummeted by 10.88% after the streaming video leader forecasted lower-than-anticipated revenue for the second quarter and announced that it will cease providing quarterly subscriber count from next year.

Among the losers of the week, the consumer discretionary sector also stood out in bright red (down 4.52%), weighed down by Tesla (TSLA). The TSLA stock fell more than 14% week-over-week after the EV manufacturer announced that it will lay off more than 10% of its global workforce as it grapples with worsening sales. The consumer discretionary sector is now in the red for the year (down 2.53%), just behind real estate, by far the worst performer (down 10.58%) hit by the climb in Treasury yields.

Please note this article is for information purposes only and does not in any way constitute investment advice. It is essential that you seek advice from a registered financial professional prior to making any investment decision.