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Wall Street stocks fell on Friday as signs of weak demand from the world’s largest chipmaker hurt Big Tech stocks.
The benchmark S&P 500 fell 1.2 percent on the day, while the tech-dominated Nasdaq Composite fell 1.6 percent. On a weekly basis, the indices lost 0.2 percent and 0.3 percent respectively.
Technology stocks led the market lower on Friday after news that Taiwan’s TSMC had asked its key suppliers to delay deliveries of high-end chip-making equipment.
The Philadelphia Semiconductor Index, which tracks 30 of the world’s largest semiconductor manufacturers, fell 3 percent.
Bryant VanCronkhite, senior portfolio manager at Allspring Global Investments, said the TSMC news spooked investors because it reminded them that the economic outlook was still uncertain despite recent optimism.
“The market has priced in a soft landing,” VanCronkhite said. “We had good economic data, falling inflation, and that increased confidence that the [Federal Reserve] the landing will stick. . . [but] There are several micro data points that suggest the all-clear flag may not be waved quite yet.”
VanCronkhite said the start of a strike among U.S. auto workers and several cautious messages from industrial groups at recent shareholder conferences also dampened some investors’ optimism.
Chip designer Arm was among semiconductor companies hit by the negative sentiment, falling 4.5 percent in its second day of trading after the company completed Wall Street’s biggest initial public offering in nearly two years.
However, shares of the SoftBank-backed company remained well above their offer price, rising 25 percent on the first day of trading.
Meanwhile, the pan-European Stoxx 600 index rose 0.3 percent, giving up some of its earlier gains, as investors cheered signs that euro zone interest rates may have peaked.
The CAC 40 in Paris rose by 1 percent, the Dax in Frankfurt rose by 0.6 percent and the FTSE 100 in London rose by 0.5 percent.
The European Central Bank on Thursday raised interest rates by a quarter of a percentage point to a record high of 4 percent, but signaled that current levels could be enough to bring inflation back to target.
Investor sentiment was also boosted by official data from China that showed retail sales and industrial production in the country rose more in August than analysts had expected.
Consumer Discretionary and Materials stocks led gains in Europe as these sectors are particularly sensitive to Chinese consumer spending expectations. The Stoxx Europe luxury index rose 1.6 percent, while Paris-listed retail giant LVMH rose 2.5 percent.
In Asia, the Hang Seng in Hong Kong rose 0.8 percent and the Topix in Tokyo rose 1 percent. China’s CSI 300 index of stocks listed in Shanghai and Shenzhen briefly recovered after the data release before falling back to end the day down 0.7 percent.
China’s economy has struggled to recover after disruptive zero-Covid measures were lifted late last year, and investors are on high alert for signs that recent stimulus measures may be gaining traction.
Stephen Innes, managing partner at SPI Asset Management, said: “There is growing optimism among a cohort of investors who believe Beijing’s recent initiatives to stimulate the economy and stabilize financial markets are showing signs of success.”
However, Innes added that “a single month of positive data is not enough to confirm a sustainable path to recovery”.
The data came after the People’s Bank of China cut banks’ reserve requirement ratio by 0.25 percentage points to 7.4 percent, freeing up an estimated RMB500 billion ($70 billion) of liquidity for lenders.
Analysts at Goldman Sachs wrote in a note that the cut would help offset a recent surge in local government bond issuance in recent weeks, which has drained liquidity from the banking system and pushed up the cost of interbank lending.
“Injecting liquidity by lowering the reserve requirement ratio would help lower interbank interest rates amid high liquidity demand and ensure low funding costs for banks,” the analysts wrote.
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