Chip Stocks Drag Down Nasdaq and S&P 500, Despite Strong Earnings

Chip stocks led the Nasdaq and S&P 500 down despite strong U.S. economic data and earnings. Technology, heavily reliant on chip performance, saw a notable drop. Despite TSMC's high profits, investor concerns about the cyclical nature of the chip industry persist, impacting major indices negatively.

The Nasdaq and the S&P 500 suffered declines on Thursday predominantly led by semiconductor stocks, despite otherwise positive U.S. economic data and robust earnings this season.

Technology, driven largely by chip stocks, emerged as the sector with the largest slump at 4.8%. It underpinned the downturn of the broader market, especially affecting the tech-focused Nasdaq. Market strategist Paul Nolte of Murphy & Sylvest pointed out the chips' significant influence in the S&P 500, noting their weight has escalated from 8% to over 20% in the past few years.

The weakness in chips persisted even after TSMC posted an impressive 77% increase in quarterly profits, indicating high expectations for this sector which has risen nearly 70% this year. Simultaneously, the market saw gains in healthcare stocks, propelled by UnitedHealth Group's positive earnings forecast. Meanwhile, GE Aerospace faced a decline despite an optimistic profit outlook for 2026.