U.S. stocks displayed a mixed performance on Wednesday, as geopolitical concerns and a profit warning from Dutch semiconductor firm ASML kept investors cautious.
Among the major averages, the Dow Jones Industrial Average achieved a new high, whereas the tech-driven Nasdaq Composite ended markedly lower.
The Dow climbed 243.60 points, or 0.59%, to close at 41,198.08. Meanwhile, the S&P 500 declined by 78.93 points, or 1.39%, ending at 5,588.27, while the Nasdaq fell 512.42 points, or 2.77%, to settle at 17,996.92.
Semiconductor stocks saw a significant drop, with the Philadelphia Semiconductor Index losing nearly 7%.
The sell-off in semiconductor stocks followed a Bloomberg report indicating that President Joe Biden's administration is contemplating stricter trade regulations against companies in its crackdown on China’s access to advanced chip technology.
According to Bloomberg, the administration has informed allies about potentially employing the most stringent trade restrictions available if companies continue providing China with advanced semiconductor technology.
Bloomberg, citing individuals familiar with recent discussions, reported that the U.S. is considering implementing the foreign direct product rule—allowing the country to impose controls on foreign-made products that incorporate even minimal amounts of American technology.
Additionally, negative sentiment was fueled by former President Donald Trump's suggestion that Taiwan should compensate the U.S. for its defense efforts, claiming the island nation took "about 100%" of America's chip business.
Among the semiconductor giants, Nvidia dropped 6.6%, Advanced Micro Devices plummeted over 10%, Applied Materials lost 10.6%, Micron Technology tumbled 6.25%, and KLA Corporation fell by 10%.
Meta Platforms decreased by 5.6%, and Applied Materials Inc. shares fell over 10%. Other tech behemoths like Apple Inc., Microsoft Corporation, Alphabet, Eli Lilly, Amazon, Tesla, Broadcom, Oracle Corporation, Qualcomm, and Texas Instruments also saw significant declines.
Conversely, companies like ADP, Progressive Corporation, AT&T, Comcast Corporation, Pfizer, Verizon Communications, Philip Morris International, Abbott Laboratories, McDonald's Corporation, Cisco Systems, Wells Fargo, PepsiCo, Coca-Cola, and Chevron Corporation recorded notable gains.
In economic news, the U.S. Commerce Department reported a substantial rebound in new residential construction for June. Housing starts rose by 3.0% to an annual rate of 1.353 million, after dropping 4.6% to a revised 1.314 million in May. Economists had anticipated a 2.6% increase to 1.310 million.
The Commerce Department also noted that building permits surged by 3.4% to an annual rate of 1.446 million in June, following a 2.8% decline to a revised 1.399 million in May. Building permits, indicative of future housing demand, were expected to rise by 0.3% to 1.390 million.
Separately, a Federal Reserve report showed that U.S. industrial production increased more than anticipated in June, climbing 0.6% following a 0.9% rise in May. Economists had forecasted a 0.3% increase.
In overseas markets, Asian indices ended with mixed results. Japan's Nikkei 225 Index fell by 0.4%, while Hong Kong’s Hang Seng Index edged up by 0.1%.
European stocks mostly spent the session in negative territory on Wednesday, closing with a cautious tone. Germany's DAX and France's CAC 40 declined by 0.44% and 0.12%, respectively, while the U.K.'s FTSE 100 inched up by 0.28%.
