Plunge in Chipmakers Drags Stock Indexes Sharply Lower

The S&P 500 Index ($SPX) (SPY) on Tuesday closed down -1.44%, the Dow Jones Industrial Average ($DOWI) (DIA) closed down -0.09%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down -3.29%.  September E-mini S&P futures (ESU26) fell -1.41%, and September E-mini Nasdaq futures (NQU26) fell -3.28%. 

Stock indexes sold off sharply on Tuesday, with the S&P 500 posting a 1.5-week low and the Dow Jones Industrial Average and the Nasdaq 100 posting 1-week lows.  Concerns over the high valuations of chipmakers and memory stocks, among the biggest beneficiaries of the artificial-intelligence trade, have led to global selling in those sectors on Tuesday as investors question whether future returns can justify current spending on AI.  Tuesday’s +5% jump in International Business Machines limited losses in the Dow Jones Industrials.

Tuesday’s stock slump began in Asia, with Japan’s Nikkei Stock Average falling by more than -3%.  Also, South Korea’s Kospi index closed down more than -10%, as foreign investors offloaded more than $2.5 billion of Kospi shares.  South Korea’s SK Hynix and Samsung Electronics closed down by more than -12%, sparking forced liquidation that hit retail investors trading on margin, compounded by a wave of selling tied to leveraged exchange-traded funds (ETFs) tracking the two chip giants.

Stock indexes recovered from their worst levels on Tuesday amid signs of strength in the US economy, after the Jun S&P manufacturing PMI unexpectedly rose by +0.6 to 55.7, stronger than expectations of a decline to 54.6 and the strongest figure in 4 years.

On the negative side, the US Jun Richmond Fed manufacturing survey current conditions fell -9 to 4, weaker than expectations of 8.

The markets are discounting a 36% chance of a +25 bp rate hike at the next FOMC meeting on July 28-29.

Overseas stock markets settled sharply lower on Tuesday. The Euro Stoxx 50 fell to a 1-week low and closed down -1.28%.  China's Shanghai Composite fell from a 1-month high and closed down -1.37%. Japan’s Nikkei-225 Stock Average closed down -3.55%.

Interest Rates

September 10-year T-notes (ZNU6) on Tuesday closed up +4.5 ticks, and the 10-year T-note yield fell -1.6 bp to 4.493%.  T-notes settled higher as Tuesday’s sharp selloff in global equity markets fueled safe-haven demand for government debt securities.  Also, easing inflation expectations were supportive of T-notes, as the 10-year breakeven inflation rate fell to a 6-month low of 2.210% on Tuesday.  In addition, solid demand for the Treasury’s $69 billion auction of 2-year T-notes was positive for T-notes, as the auction had a bid-to-cover ratio of 2.64, better than the 10-auction average of 2.61. 

Gains in T-notes were limited after the Jun S&P manufacturing PMI unexpectedly expanded at the strongest pace in four years, a hawkish factor for Fed policy.  Also, supply pressures are negative for T-notes as the Treasury will auction $211 billion of T-notes and floating-rate notes this week.

European government bond yields moved lower on Tuesday.  The 10-year German bund yield dropped to a 2.5-month low of 2.904% and finished down -3.3 bp to 2.919%.  The 10-year UK gilt yield fell -5.4 bp to 4.754%.

The Eurozone Jun S&P manufacturing PMI fell -0.3 to 51.3, weaker than expectations of no change at 51.6.  However, the Jun S&P composite PMI rose +1.0 to 49.5, stronger than expectations of 49.2.

Eurozone May new car registrations rose +3.2% y/y to 955,000 units, the fourth consecutive monthly increase.

ECB Chief Economist Philip Lane said ECB Officials face the risk that inflation will hover above their goal "for quite some time."

The UK Jun SP manufacturing PMI fell -0.8 to 53.1, weaker than expectations of 53.5.

Swaps are discounting a 10% chance of a +25 bp ECB rate hike at its next policy meeting on July 23.

US Stock Movers

Chipmakers and AI-infrastructure stocks sold off sharply, driving Tuesday’s selloff in equity markets.  The iShares Semiconductor ETF (SOXX) closed down more than -8%.  Sandisk (SNDK) closed down more than -12% to lead the S&P 500 and Nasdaq 100 losers, and Micron Technology (MU) closed down more than -13%.  Also, ON Semiconductor (ON), ARM Holdings NV (ARM), and Microchip Technology (MCHP) closed down more than -10%, and Lam Research (LRCX), Analog Devices (ADI), Marvell Technology (MRVL),and KLA Corp (KLAC) closed down more than -9%.  In addition, Western Digital (WDC), ASML Holding NV (ASML), Applied Materials (AMAT), Texas Instruments (TXN), and Qualcomm (QCOM) closed down more than -8%, and NXP Semiconductors NV (NXPI) closed down more than -7%.  Finally, Intel (INTC) closed down more than -6%, Advanced Micro Devices (AMD) and Seagate Technology Holdings Plc (STX) closed down more than -5%, and Nvidia (NVDA) closed down more than -4% to lead losers in the Dow Jones Industrials. 

Mining stocks were under pressure on Tuesday, as gold and silver prices fell sharply.  Coeur Mining (CDE) and Freeport McMoRan (FCX) closed down more than -6%, and Southern Copper (SCCO) and Hecla Mining (HL) closed down more than -5%.  Also, Newmont Corp (NEM), Barrick Mining (B), and Anglogold Ashanti (AU) closed down more than -3%. 

Primoris Services (PRIM) closed down more than -21% after cutting its full-year profit outlook to $2.05 to $2.60 from a previous estimate of $4.80 to $5.00, well below the consensus of $4.74. 

Best Buy (BBY) closed down more than -1% after announcing that CFO Bilunas will step down at the end of July after 20 years, including seven years as CFO. 

Nike (NKE) closed down more than -1% after Evercore ISI downgraded the stock to inline from outperform. 

Edgewell Personal Care Co (EPC) closed up more than +15% after rejecting an unsolicited takeover offer from Yellow Wood Partners, saying the $30 a share offer is too low. 

International Business Machines (IBM) closed up more than +5% to lead gainers in the Dow Jones industrials after JPMorgan Chase upgraded the stock to overweight from neutral with a price target of $291.   

CDW Corp (CDW) closed up more than +5% after Morgan Stanley upgraded the stock to overweight from equal weight with a price target of $170.

GE HealthCare Technologies (GEHC) closed up more than +5% after RBC Capital Markets initiated coverage on the stock with an outperform rating and a price target of $80.

Target (TGT) closed up more than +3% after Wolfe Research upgraded the stock to outperform from peer perform with a price target of $162.

Avis Budget Group (CAR) closed up more than +2% after entering into a settlement agreement with Pentwater Capital Management, which will pay Avis $650 million to resolve a lawsuit seeking recovery of short-swing profits.

Earnings Reports(6/24/2026)

Daktronics Inc (DAKT), HB Fuller Co (FUL), Immersion Corp (IMMR), Jefferies Financial Group Inc (JEF), Methode Electronics Inc (MEI), Micron Technology Inc (MU), Millerknoll Inc (MLKN), Novagold Resources Inc (NG), Paychex Inc (PAYX), Worthington Steel Inc (WS).