Chip Stocks Get Crushed as Korea's KOSPI Drops 5%, J&J Falls 6%: Markets Today

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Oct 13, 4:59 PM • 6 hours ago

Chip Stocks Get Crushed as Korea's KOSPI Drops 5%, J&J Falls 6%: Markets Today

A memory-chip scare out of China hammered Samsung and SK Hynix in Seoul, spilled into Micron and Applied Materials, and dragged the Nasdaq lower, while big-bank earnings kept the Dow from falling apart.

Key Points

Chip stocks sold off hard after China's CXMT announced progress on a more efficient memory-cell design, sending Samsung and SK Hynix down roughly 8% each in Seoul and dragging South Korea's KOSPI down 5%.
The pain spread to U.S. semiconductors: Micron dropped 4.9% and Applied Materials tumbled 6.5%, with the Nasdaq 100 leading index declines at -0.5%.
Big-bank earnings were a mixed bag: JPMorgan rose about 1% despite a profit miss, Goldman Sachs jumped on a huge beat, and Wells Fargo fell 1.5% on a revenue shortfall.
Johnson & Johnson sank 6.2% despite a profit beat and raised full-year outlook, weighed down by a MedTech miss and a one-time talc litigation charge.
Energy and communications held firm while industrials and health care slid, with WTI crude near $93.95 and the 10-year Treasury yield holding near 5.22%.

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U.S. stocks slipped by midday Tuesday, and the culprit was a chip-sector rout sparked by a 5% plunge in South Korea's KOSPI. That was enough to offset gains in banks and energy, leaving the S&P 500 hovering just below 7,800 while the Nasdaq 100 led the declines.

Here's the chain of events. China's CXMT announced progress on a more efficient memory-cell design, and that was all it took to send Samsung Electronics Co. Ltd. (OTC: SSNLF) and SK Hynix Inc. (NASDAQ: SKHY) down roughly 8% each in Seoul. Memory chips are a commodity business with brutal economics, and anything that smells like more efficient supply tends to make existing producers nervous.

That spilled straight into U.S. semiconductors, where Micron Technology Inc. (NASDAQ: MU) dropped 4.9% and Applied Materials Inc. (NASDAQ: AMAT) tumbled 6.5%.

The S&P 500 slipped 0.2% to 7,795. The Nasdaq 100 fell 0.5% to 30,511, with chip weakness weighing on it. The Russell 2000 lost 0.6% to 2,777.

Big-Bank Earnings Keep the Dow From Falling Apart

Banks did their part to hold things together. JPMorgan Chase & Co. (NYSE: JPM) rose about 1% even after its profit of $15.3 billion, or $5.57 per share, missed the $5.90 estimate. Meanwhile Goldman Sachs Group Inc. (NYSE: GS) gained after earnings of $17.01 per share crushed the $13.02 consensus. That's not a beat, that's a different sport.

Wells Fargo & Co. (NYSE: WFC) fell 1.5% even as earnings of $1.87 per share topped the $1.84 consensus, because revenue of $21.87 billion missed the $22.31 billion forecast. Profits are nice, but the top line is where the story lives.

Elsewhere among blue-chip stocks, Johnson & Johnson (NYSE: JNJ) sank 6.2% despite a profit beat and a raised full-year outlook, weighed by a MedTech miss and a one-time talc litigation charge. Caterpillar Inc. (NYSE: CAT) fell 5.0% in the broader industrials pullback.

In energy, WTI crude traded near $93.95 per barrel, up 0.2%, while Brent edged 0.9% lower to $105.72. Gasoline has now tied 2022's record for most days above $4 per gallon in a single year. That's the kind of stat that shows up in grocery-aisle conversations.

The 10-year Treasury yield held near 5.22%, down 2 basis points, a level that continues to cap valuations in rate-sensitive corners of the market.

Odds of another quarter-point hike at the Oct. 27-28 FOMC meeting stood near 26% as of Oct. 7, according to CME FedWatch.

Tuesday's Performance In Major US Indices

According to market data:

The Vanguard S&P 500 ETF (NYSE: VOO) slipped 0.1%.
The SPDR Dow Jones Industrial Average ETF Trust (NYSE: DIA) fell 0.3%.
The Invesco QQQ Trust (NASDAQ: QQQ) declined 0.5%.
The iShares Russell 2000 ETF (NYSE: IWM) lost 0.7%.

Chip Rout Hits Tech, Energy And Communications Hold Firm

Communication Services led the S&P 500, with the Communication Services Select Sector SPDR Fund (NYSE: XLC) up 1.1%, followed by energy, as the Energy Select Sector SPDR Fund (NYSE: XLE) gained 1.2%.

On the Downside

The Industrials Select Sector SPDR Fund (NYSE: XLI) fell 1.2% and the Health Care Select Sector SPDR Fund (NYSE: XLV) slid 1.2%, the latter dragged by Johnson & Johnson (NYSE: JNJ).

The Technology Select Sector SPDR Fund (NYSE: XLK) lost 0.5% and the Real Estate Select Sector SPDR Fund (NYSE: XLRE) dropped 0.6%, while the Financial Select Sector SPDR Fund (NYSE: XLF) edged 0.2% lower.

Among industry funds, the SPDR S&P Oil & Gas Exploration & Production ETF (NYSE: XOP) rose 2.0% on firm crude, while the VanEck Semiconductor ETF (NASDAQ: SMH) fell 1.5% and the VanEck Gold Miners ETF (NYSE: GDX) slid 2.0% alongside softer gold. The SPDR S&P Regional Banking ETF (NYSE: KRE) lost 1.0%.

Flex Ltd. (NASDAQ: FLEX) fell 6.8% after announcing plans to spin off its Cloud and Power Infrastructure unit as Axiom Solutions International, in addition to the broader AI-hardware pullback.

AST SpaceMobile Inc. (NASDAQ: ASTS) sank 8.8% after Piper Sandler cut the stock to Neutral, citing the threat from SpaceX's direct-to-cell effort.

On the Upside

Fermi Inc. (NASDAQ: FRMI) soared 17.4% after announcing an AMD credit-support agreement for its Project Matador AI-infrastructure site in Texas, with Advanced Micro Devices Inc. (NASDAQ: AMD) named as the partner.

At last check, HF Sinclair Corp. (NYSE: DINO) was up 4.2%; Valero Energy Corp. (NYSE: VLO) up 3.2%; Phillips 66 (NYSE: PSX) up 2.9%; and Marathon Petroleum Corp. (NYSE: MPC) up 2.8%.

Tuesday's Russell 1000 Top Gainers

Tuesday's Russell 1000 Top Losers

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