Microchip Shares Plunge Amid Market Volatility and Trade Tensions

The S&P 500 and Nasdaq fell on Wednesday due to a sharp decline in microchip shares amidst growing U.S.-China trade tensions. The potential for severe U.S. trade restrictions on China led to significant drops in tech-related stocks, causing notable market volatility. Meanwhile, macroeconomic reports showed mixed signals, with strong housing and industrial data offset by a potentially softening job market.

The S&P 500 and the Nasdaq experienced declines on Wednesday as microchip shares plunged, exacerbated by mounting U.S. trade conflicts with China. A report indicating that the Biden administration is considering severe trade restrictions caused microchip stocks to tumble by 5.8%, the Philadelphia SE Semiconductor index's largest one-day drop since October 2022.

The Nasdaq dropped more than 2% due to a pullback in 'Magnificent 7' momentum stocks like Nvidia Corp, Apple Inc, and Microsoft Corp, alongside a 1% slide in the S&P 500. Conversely, the Dow Jones Industrial Average saw a modest gain, buoyed by Johnson & Johnson, UnitedHealth Group, and Intel Corp.

Investor anxiety is growing, as evidenced by a spike in the CBOE Market Volatility index. Economic indicators, however, offered a mixed outlook with strong housing starts and industrial output but signs of a softening jobs market. Market speculation suggests a 93.5% probability of the Federal Reserve cutting rates by September.

(With inputs from agencies.)