Nasdaq falls, Dow struggles for altitude as Nvidia’s falling stock sinks chip makers
U.S. stock indexes traded mixed Friday, but on track for weekly losses, as a decline in shares of chip maker Nvidia helped to dent sentiment in the technology sector.
How did the benchmarks fare?
The Nasdaq Composite Index DJIA, +0.04% was down 30 points, or 0.4%, at 7,229, the Dow Jones Industrial Average SPX, -0.20% rose 14 points, or 0.1% to 25,307, while the S&P 500 index COMP, -0.83% was declining 3 points to reach 2,727, a drop of 0.1%.
For the week, the Dow is set to post a loss of 2.6%, the S&P 500 is on track to decline by 1.9%, while the Nasdaq is set to decline 2.4%.
What drove the market?
Shares of Nvidia Corp. fell sharply after reporting disappointing quarterly results late Thursday, contributing to a week filled with negative triggers.
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U.K.'s Theresa May Faces Turmoil Over Brexit Deal
Meanwhile, investors were closely watching developments in the U.K., with Prime Minister Theresa May defiantly pledging her commitment to seeing Britain’s exit from out of the European Union, despite several top-level resignations and growing doubts about her leadership.
Although the events are playing out about 3,460 miles away from Wall Street, the dilemma—should it result in a hard Brexit, or no trade pact for the U.K.—could roil the financial world, some market participants believe.
On top of that, Brexit drama may compound concerns about slowing global growth, after the German government announced Wednesday that its economy contracted in the third quarter for the first time in three years. That follows on a similar report out of Japan this week, which also showed the world’s third-largest economy contracting in the third quarter
Uncertainties around tariff spats between the U.S. and China, however, remain the centerpiece of anxieties for market participants. Throughout the week, quickly shifting narratives around progress in negotiations have whipsawed equity benchmarks.
U.S. Trade Representative Robert Lighthizer’s office on Thursday denied reports that he had told a few people that the next batches of tariffs have been put on hold, which had been an early driver for the session’s climb.
What stocks were in focus?
Nvidia shares NVDA, -18.13% fell 17%. Nvidia shares had already declined 22% in the past three months, and the PHLX Semiconductor Index SOX, -2.06% a popular product for wagering on semiconductor shares, is down 4.1% in 2018.
The Nvidia selloff was sparked by a Thursday-evening earnings release by the company, which showed it missing revenue expectations for the third quarter and issuing forward guidance well below expectations. The selling was compounded by Stifel Nicolaus cutting its price target for the firm from $200 to $250.
Shares chip maker Advanced Micro Devices Inc. AMD, -5.77% also decline in sympathy.
Nordstrom, Inc.’s stock JWN, -13.54% was tumbling 12.7%, after the retailer reported earnings for the third quarter well below analysts expectations.
California utilities PG&E Corp. PCG, +34.70% and Edison International EIX, +12.51% surged after investors fled these stocks earlier in the week on concerns that these companies may be held responsible for the deadly, ongoing wildfires in California.
Investors were soothed by assurances by California State Public Utilities Commission President Michael Picker, made in an interview with Bloomberg, that the state would be very reluctant to allow these firms to go bankrupt. PG&E shares are up 38.8% Friday morning, while Edison International stock is rising 13.5%.
Applied Materials Inc. AMAT, -0.57% stock is in focus, after the company reported guidance Thursday evening that fell short of Wall Street’s hopes. The stock is down 4.9% Friday.
Shares of Viacom Inc. VIA, -0.14% have reversed healthy premarket gains to trade down 1.2% in early action, following a Friday-morning earnings report that showed the media giant beating earnings and sales expectations for the fiscal fourth quarter.
What are strategists saying?
“Usually the upcoming holiday season is a great time for the markets, earnings have been strong, and we can still expect to see the lingering effects of tax cuts in the next couple of quarters,” Michael Arone, chief investment strategist with State Street Global Advisors told MarketWatch.
That we’re still seeing such volatility is a testament to how concerned investors are about slowing growth in tech companies that have provided market leadership for so long, U.S. China trade relations, rising interest rates, and the effects on both the global economy and U.S. multinational companies of a stronger dollar, Arone said.
Expect the tech sector to have a bad end to the week after dismal Nvidia earnings, Joel Kulina, analyst at Wedbush Securities, wrote in a note to clients.
“Tech sentiment remains very fragile, and rightfully so, given deteriorating trends across multiple end markets, and it’s becoming increasingly clear that many [companies] across tech are experiencing declining visibility,” Kulina wrote, warning that in the near-term tech investors should stick to the strategy “rallies are to be sold.”
“Theresa May had a disastrous day yesterday, and investors are still on edge over the political situation in the UK,” wrote David Madden, market analyst at CMC Markets U.K.
What data are in focus?
Industrial production rose 0.1% in October from September, below consensus projections of 0.2%, according to a MarketWatch poll of economists.
Capacity utilization fell from 78.5% to 78.4%, beating expectations of 78.2%
The Kansas City Fed will release its regional Manufacturing Index at 11 a.m. Eastern
Chicago Fed President Charles Evans is due to deliver a speech at 11 a.m. Eastern
Rig-count data from Baker Hughes will be released this afternoon at 1 p.m. Eastern
How are other markets trading?
Asian markets were mixed Friday, with pressure on chip makers helped drag the Nikkei NIK, -0.57% down 0.6%, while Chinese benchmarks rose modestly. European stocks are being weighed down by Brexit concerns, as the Stoxx Europe 600 SXXP, -0.20% is down 0.7%, the FTSE 100 UKX, -0.34% down 0.7%, and the DAX DAX, -0.11% has fallen 0.9%.