In a notable reversal following recent upward trends, stocks experienced a significant downturn on Wednesday, with the Nasdaq leading the decline due to pronounced weakness in technology stocks.
As of the latest data, the Nasdaq has dropped by 434.46 points, a 2.4% decrease, sitting at 18,074.88. The S&P 500 has similarly declined by 64.26 points, or 1.1%, to 5,602.94. Diverging from this trend, the Dow Jones Industrial Average has risen by 102.05 points, equating to a 0.3% gain, now at 41,056.53.
Semiconductor stocks, in particular, are among the day’s worst performers, with the Philadelphia Semiconductor Index plummeting by 4.0%. This sell-off follows a Bloomberg report indicating that President Joe Biden's administration is contemplating stricter trade regulations targeting firms involved in the semiconductor sector in China. Reports suggest the administration has warned its allies of potential severe trade restrictions if companies continue supplying China with advanced semiconductor technology. Additionally, consideration is being given to implementing the foreign direct product rule, which allows control over foreign-made products that incorporate any significant amount of American technology.
Former President Donald Trump also fueled negative market sentiment by suggesting Taiwan should compensate the U.S. for defense efforts, claiming that Taiwan has benefited substantially from America's chip industry.
Technology stocks, particularly in the computer hardware and software sectors, have also seen considerable declines, contributing to the substantial drop in the Nasdaq. Retail, gold, and transportation stocks echoed this downward movement. Conversely, utilities and commercial real estate stocks, which are sensitive to interest rate changes, displayed notable strength.
On the economic front, the U.S. Commerce Department announced a significant rebound in new residential construction for June. Housing starts surged by 3.0% to an annual rate of 1.353 million, recovering from a 4.6% decrease to a revised rate of 1.314 million in May. Economists had projected a 2.6% increase to a rate of 1.310 million from the previously reported 1.277 million. Building permits also rose by 3.4% to an annual rate of 1.446 million, following a 2.8% drop to a revised rate of 1.399 million in May, surpassing the expected 0.3% increase to 1.390 million.
In another report, the Federal Reserve highlighted a more substantial-than-anticipated rise in U.S. industrial production for June, with a 0.6% increase following a 0.9% rise in May. Economists had forecasted a 0.3% climb.
International markets reflected mixed outcomes on Wednesday. In the Asia-Pacific region, Japan's Nikkei 225 Index fell by 0.4%, while Hong Kong's Hang Seng Index edged up by 0.1%. European markets also showed mixed results; Germany's DAX Index decreased by 0.2%, whereas France's CAC 40 Index and the U.K.'s FTSE 100 Index increased by 0.2% and 0.3%, respectively.
In the bond market, U.S. treasuries experienced slight weakness following notable gains in the previous session. The yield on the benchmark ten-year note rose by 1.4 basis points, reaching 4.182%.
