Tuesday marked the second day of a market rotation away from chipmakers and toward the broader market reflecting the market’s continued digestion of significant new developments in China.
One major source of uncertainty is China’s ability to produce domestically developed immersion DUV machines, threatening the effective monopoly held by Western giants such as ASML. Although this development is not directly related to the revenue of firms such as Lam Research and Applied Materials, these companies face a significantly higher risk of aggressive U.S. export restrictions as the landscape of technological rivalry evolves.
Chinese state-backed memory manufacturers could also accelerate the normalization of supply and demand by adding more memory capacity to the market than expected. Shares of Micron, Samsung, and SK Hynix declined for a second consecutive day.
The major indices reflected the same trend. The Dow Jones Industrial Average rose 537 points to 52,747. The Nasdaq declined 0.22% to 24,877. The S&P 500 rose 0.21% to 7,429. The technology sector led today’s decline, while defensive sectors rose significantly, with healthcare posting a gain of 2.36%.
The Treasury market also rallied as oil prices cooled again, with Brent crude declining to around $80 per barrel. Both the U.S. 5-year Treasury yield and the 10-year yield declined by 3 basis points, to 4.37% and 4.61%, respectively.
Today’s consumer confidence reading declined, as many consumers felt worse about business conditions and the labor market. Nevertheless, they have yet to change their spending plans.
Tomorrow will be significant because the Federal Reserve is scheduled to announce its policy decision. We have yet to see a consistent pattern in Kevin Warsh’s policy positions and stated goals.
Adams Wealth Advisors will be back with an update on the Fed. Thank you for listening.