Nasdaq falls as U.S. export controls on China weigh on chip stocks By Reuters

©Reuters. A trader works on the floor of the New York Stock Exchange (NYSE) in New York City, U.S. October 7, 2022. REUTERS/Brendan McDermid

By Shreyashi Sanyal and Bansari Mayur Kamdar

(Reuters) – The Nasdaq hit a two-year low on Monday as chipmakers bore the brunt of a US effort to weaken China’s semiconductor industry amid caution ahead of the start of the earnings season.

The stock fell 3.5%, also hitting a two-year low, after the Biden administration on Friday unveiled a raft of export controls, including a measure to cut off China from certain semiconductor chips made around the world with US equipment.

Some of the index’s largest components, including Nvidia (NASDAQ:) Corp, Qualcomm (NASDAQ:) Inc, Micron Technology Inc (NASDAQ:) and Advanced Micro Devices (NASDAQ:) fell between 1.13% and 3.65%.

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Major US banks are expected to start the third-quarter earnings season in earnest on Friday amid concerns about the impact of inflationary pressures, rising interest rates and geopolitical uncertainties on their earnings.

Corporate earnings are now expected to rise 4.1% over the trailing three months, compared with an 11.1% rise expected in early July as more analysts price in a downturn next year, according to Refinitiv data.

“We are now rolling into earnings season, so there are some concerns about a continuation of the weakness seen in the second quarter,” said Jonathan Waite, fund manager and principal equity analyst at Frost Investment Advisors.

Wall Street fell on Friday after a solid September jobs report that raised the likelihood that the Federal Reserve would stick to its aggressive hike-rate campaign and likely push the US economy into a recession.

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Chicago Fed President Charles Evans on Monday joined the chorus of other central bankers supporting the Fed’s attempt to lower inflation without a sharp rise in unemployment, even as it continues to hike interest rates.

“We had a pretty strong down day on Friday, and from the Fed’s perspective, the picture doesn’t change much in terms of inflation or how quickly rate hikes could continue,” said Randy Frederick, managing director of trading and derivatives at the Schwab Center.

“So volatility will remain at least until the Fed meeting on November 2nd and probably a week after that when the midterms arrive.”

Money markets are pricing in an 89% probability of another 75 basis point hike at the November Fed meeting.

Investors also awaited inflation reports throughout the week, including consumer price data, which are likely to have risen over the past month.

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At 12:01 p.m. ET, the S&P 500 was up 54.42 points, or 0.19%, at 29,242.37, the S&P 500 was down 21.12 points, or 0.58%, at 3,618.54, and the S&P 500 was down 101.64 points, or 0.95% at 10,550.77.

tech giant microsoft corp (NASDAQ:) fell 2.22%, dragging the S&P 500 technology sector index down 1.6%.

The US bond market was closed on Monday for the Columbus Day holiday.

At a 1.64-to-1 ratio on the NYSE and a 1.68-to-1 ratio on the Nasdaq, declining issues outweighed the movers.

The S&P index posted a new 52-week high and 49 new lows, while the Nasdaq posted 38 new highs and 351 new lows.

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