Hoped-for recovery in chip market looking less likely as global sales fall for third straight quarter
Tech stocks led Monday’s stock-market selloff, with chip makers the worst performers amid the escalating trade war with China, as the tech-heavy Nasdaq Composite Index experienced its longest losing streak since President Donald Trump was elected.
The Nasdaq COMP, -3.47% finished down 3.5% on Monday, compared with a 2.9% drop in the Dow Jones Industrial Average DJIA, -2.90% and a 3% drop in the S&P 500 index SPX, -2.98% . The Nasdaq logged its sixth losing session in a row, its longest losing streak since Nov. 4, 2016, when the index capped a nine-session losing streak, according to Dow Jones data. Over the current losing streak, the Nasdaq is already in a correction, down more than 10%.
The tech sector was also the worst performer of the S&P 500’s 11 sectors, finishing down 4.1%. The communications services sector, which includes heavyweights such as Alphabet Inc. GOOG, -3.49% GOOGL, -3.47% and Facebook Inc. FB, -3.86%, closed down 2.9%.
In tech, the PHLX Semiconductor Index SOX, -4.36% felt the selloff the most, finishing down 4.4%. The SOX index fell for a fifth straight session, its longest losing streak since Oct. 11, 2018, when it fell for six straight trading days, according to Dow Jones data.
Worst-hit Monday was ON Semiconductor Corp. ON, -10.66%, with shares plunging nearly 11% after reporting earnings, followed by a 6.5% drop in Nvidia Corp. NVDA, -6.45% shares. Micron Technology Inc. MU, -4.85% shares fell 4.9%, Advanced Micro Devices Inc.’s AMD, -4.93% stock fell 4.9%, and Intel Corp. INTC, -3.51% shares slumped 3.5%.
Adding to chip woes, the Semiconductor Industry Association reported late Monday that global chip sales dropped for a third straight quarter and for their sixth month in a row.
While SIA acknowledged that quarterly sales increased 0.3% on a sequential basis, that may have come at the price of the second half, as vendors rushed to head off tariffs in the U.S. trade war with China, as evidenced by a second-quarter rise in PC sales reported by research firms Gartner and IDC.
Instinet analyst David Wong, who holds neutral ratings on the majority of chip stocks and buy ratings on AMD and Intel, said the hoped-for second-half turnaround for chip makers isn’t looking very promising and that we “remain deep in a semiconductor downturn.”
“Guidance given by chip companies that we consider to be broad indicators for many chip end markets suggests to us that the YoY declines are unlikely to improve in the September quarter,” Wong said.
The chip sector hit a high on July 24, when the SOX closed at 1,622.02, following promising initial earnings reports from chip makers.