After opening higher on the back of a strong February CPI, stocks tumbled into the red in early afternoon trading Tuesday. Some investors appear spooked by the latest political drama in the U.S., including the Trump administration’s decision to block the proposed Broadcom-Qualcomm merger and Rex Tillerson’s departure from the State Department.
Through 1:45pm EST, the Dow Jones Industrial Average was down about 0.15% on the day, while the broader S&P 500 index was about 0.44% lower than its Monday close. But the tech-heavy Nasdaq composite led the day’s losers, slumping more than 0.80%.
One of the worst-performing tech stocks of the day was Qualcomm QCOM, which dropped more than 4.5% in morning trading after President Donald Trump shut down the chipmaker’s proposed merger with Broadcom AVGO.
In a presidential order released on Monday, Trump said “credible evidence” led him to conclude that Singapore-based Broadcom’s buyout of Qualcomm would have impaired the national security of the United States. The deal, if it had gone through, would have marked the largest technology acquisition in history.
On Tuesday, President Trump ousted Secretary of State Rex Tillerson, the former CEO of Exxon Mobil XOM, from his position. Tillerson was considered to be a level-headed businessman with an appreciation for global deals, so his firing could be another indication that the White House intends to shake up trade policy.
“The worry is with the Tillerson ouster and Broadcom blockage from the Trump administration that this will add fuel to the fire in a battle versus China on the horizon over the coming 12 to 18 months,” said GBH Insights analyst Dan Ives in a note.
The Trump administration has already raised concerns about an impending trade war with China by implementing new tariffs on imported steel and aluminum. Metal exports to America are not a huge piece of China’s economy, but the tariffs were seen as a direct challenge to the Asian nation.
But those tariffs will likely impact U.S.-based metal importers the most, leaving plenty of tech firms unscathed. However, Washington’s latest moves, including Tillerson’s departure and the rejection of the Broadcom-Qualcomm deal, could spell volatility for the sector.
“While most tech names including FANG stocks are relatively insulated from any China worries/headwinds, this is enough of a near term concern for tech investors to take some profits after a golden run over the last few weeks with many of these names making new highs,” Ives added.
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