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Stock Market News for Aug 10, 2022

·4 min read

U.S. stocks ended lower on Tuesday triggered by a selloff in semiconductor and tech stocks, following disappointing results from a batch of big corporates as investors await key inflation data that could lead the Fed to continue with steep rate hikes. All the three major indexes ended in negative territory.

How Did The Benchmarks Perform?

The Dow Jones Industrial Average (DJI) lost 0.2% or 58.13 points to finish at 32,774.41 points.

The S&P 500 shed 0.4% or 17.59 points to close at 4,122.47 points. Consumer discretionary and tech stocks were the biggest losers.

The Technology Select Sector SPDR (XLK) declined 1%, while the Consumer Discretionary Select Sector SPDR (XLY) lost 1.6%. However, energy stocks rallied. The Energy Select Sector SPDR (XLE) gained 1.8%.  Seven of the 11 sectors of the benchmark index ended in negative territory.

The tech-heavy Nasdaq shed 1.2% or 150.53 points to end at 12,493.93 points. The index also recorded its third consecutive day of losses.

The fear-gauge CBOE Volatility Index (VIX) was up 2.25% to 21.77. Decliners outnumbered advancers on the NYSE by a 1.91-to-1 ratio. On Nasdaq, a 2.41-to-1 ratio favored declining issues. A total of 10.64 billion shares were traded on Tuesday, lower than the last 20-session average of 10.94 billion.

Semiconductor, Tech Stocks Take a Hit

Markets started on a high on Monday but couldn’t hold on to the gains, with stocks ending mostly lower for the day. The negative sentiment persisted through Tuesday, which worsened after semiconductor giant Micron Technology, Inc. MU warned that revenues could decline further from its previous guidance due to supply chain crisis and other macroeconomic factors.

The warning from Micron Technology came a day after NVIDIA Corporation NVDA announced weaker-than-expected revenues in its preliminary financial results for its second-quarter fiscal 2023. This led Micron’s shares to decline 3.7%.

The announcement led to a massive selloff in semiconductor stocks. Shares of STMicroelectronics N.V. STM plummeted 5.7%, while NVIDIA declined 4%. STMicroelectronics sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here.

The declines came despite President Joe Biden signing a Chips and Science Act into law on Tuesday, that promises to help boost the production of semiconductors and also make the United States self-reliant.

Besides semiconductors, several other Nasdaq-listed stocks suffered on Tuesday. Shares of Novavax, Inc. NVAX plummeted 29.6% after the company revised its full-year revenue guidance downward citing shrinking demand for COVID-19 vaccines.

Investors Await Inflation Data

So far it has been an impressive earnings season. This has helped the S&P 500 gain for three straight weeks. However, weaker revenue guidance from several companies with strong jobs data.

Investors were expecting a softer rate hike when the Fed meets next in September after some big companies announced their layoff plans. This gave them the impression that the labor market was softening. However, jobs data released by the government last week showed solid job additions to the U.S. economy in July once again has made investors believe that the Fed will continue with its steep rate hike in its next meeting.

Moreover, negative sentiment is running wild among investors ahead of the release of key inflation data tomorrow. They are still trying to gauge the stance the Fed is going to control surging inflation.

Economic Data

In economic data released on Friday, nonfarm productivity declined 4.6% in the second quarter. Meanwhile, unit labor costs soared 10.8% in the second quarter from an upwardly revised 12.7% in the prior quarter.

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