US Stocks Flat as Chipmakers Drop, Yields Rise; Biden’s AI Chip Export Halt Hits Market
U.S. stocks closed mostly unchanged or slightly lower on Tuesday as Treasury yields climbed and chipmaker stocks declined following the announcement that the Biden administration plans to halt shipments of advanced artificial intelligence chips to China. The Philadelphia SE Semiconductor index saw a significant drop, along with shares of Nvidia, despite the chipmaker’s reassurance that it does not anticipate a significant immediate impact on its financial results due to the restrictions.
The rise in U.S. Treasury yields, driven by robust economic data, contributed to the lackluster performance of stocks. Higher yields make risk-free government bonds more appealing to investors as they offer higher income compared to stocks.
However, the decline in stocks was somewhat curtailed by positive earnings reports from companies like Bank of America, whose stock rose following the release of its quarterly results. We had some pretty good earnings from most of the major companies reporting today… but the indices are running up against a barrier as yields go higher, said Peter Cardillo, chief market economist at Spartan Capital Securities.
Preliminary data indicates that the S&P 500 closed with a marginal loss of 0.01%, or 0.35 points, at 4,373.21 points, while the Nasdaq Composite saw a 0.25% decline of 34.24 points to 13,533.75. The Dow Jones Industrial Average, on the other hand, rose slightly by 0.04%, or 13.87 points, to 33,998.41.
Earlier reports revealed that U.S. retail sales in September exceeded expectations, driven by increased purchases of motor vehicles and higher spending in restaurants and bars. Another separate report indicated that production in U.S. factories also surpassed estimates for the month of September.
However, such positive news on the economic front could potentially have a downside effect on the stock market. Anthony Saglimbene, chief market strategist at Ameriprise Financial, explained, Good news could be bad news for the stock market because it implies that the Federal Reserve is going to leave interest rates higher for longer, and maybe it pushes out some of the expectations for rate cuts in 2024.
Investors are also closely monitoring developments in the Middle East. An Israeli airstrike resulted in the death of approximately 500 Palestinians at a Gaza City hospital, further escalating tensions. Additionally, U.S. President Joe Biden is scheduled to visit Israel to demonstrate support for the country in its conflict with Hamas, the ruling party in the Gaza Strip.
In other news related to earnings, Goldman Sachs reported that its third-quarter profit decline was lower than expected, although its shares still experienced a decrease.
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