The US stock market opened lower on Thursday evening, Beijing time, with the Nasdaq down nearly 0.9%. The semiconductor sector showed weakness. Traders are assessing whether corporate earnings can support further gains in artificial intelligence-related trades, while uncertainty in the Middle East continues to develop. US retail sales met expectations, jobless claims fell, and a key factory activity gauge for the Philadelphia region hit a near five-year high.
The Dow Jones Industrial Average fell 36.43 points, or 0.07%, to 52,622.21. The Nasdaq Composite dropped 231.10 points, or 0.88%, to 26,038.13. The S&P 500 index declined 27.39 points, or 0.36%, to 7,545.01.
Chip stocks were broadly lower in early trading. The VanEck Semiconductor ETF (SMH) fell 2.2%, with Arm Holdings leading the decline, down 4%. Taiwan Semiconductor Manufacturing Company fell 4.6%, despite its latest quarterly results exceeding expectations.
Following a 11% plunge in shares of SK Hynix in Seoul, Switzerland's STMicroelectronics, Europe's largest chipmaker, fell 3%. Dutch chip equipment maker ASM International declined 2.92%, and Germany's Infineon Technologies dropped 2.8%.
Wall Street had risen in the previous session as a lower-than-expected US Producer Price Index (PPI) boosted optimism about cooling inflation. Additionally, strong financial reports from major institutions reassured investors that profit growth remains solid despite slowing inflation, while falling US Treasury yields boosted demand for growth stocks, particularly large-cap technology shares.
Michael Kantrowitz, Chief Investment Strategist and Head of Portfolio Strategy at Piper Sandler, emphasized in an interview that stable or declining interest rates are crucial for market broadening.
"For the market to broaden, I firmly believe you need interest rates to either move sideways or decline," he said. "In the current environment, the most favorable backdrop for the stock market is for employment to remain relatively weak, as I believe that helps keep a lid on interest rates and prevents them from rising."
Corporate earnings remain a key driver. UnitedHealth Group is scheduled to report results before the market opens, and Netflix will report after the close on Thursday.
Economic data released on Thursday showed US retail sales growth matched expectations, initial jobless claims fell, and the factory activity index for the Philadelphia region surged to its highest level in nearly five years.
According to seasonally adjusted, non-inflation-adjusted data from the US Commerce Department, the advance estimate for retail and food services sales increased 0.2%, in line with expectations. However, sales excluding autos fell 0.2%, whereas the market had anticipated a 0.2% increase. Gas station sales plunged 5.3%, impacted by falling oil prices.
For the week ending July 11, seasonally adjusted initial jobless claims fell to 208,000, a decrease of 8,000 from the previous week and below the Dow Jones estimate of 218,000. Continuing claims, which lag by one week, decreased by 16,000 to just over 1.8 million.
The Philadelphia Fed Manufacturing Index, which measures the proportion of firms reporting growth versus contraction, surged to 41.4 in July, rising about 31 points from the prior reading, far exceeding the expected 9.8 and marking its highest level since November 2021.
The New York Fed's Services Business Activity Index registered 8.7, marking its first positive reading in nearly two years and reaching its highest level since 2022.
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