US Stocks Close Sharply Lower on Plunging Chip Stocks, Mixed Data

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US stocks ended sharply lower on Friday, August 18, 2023, as plunging chip stocks and mixed economic data dampened investors’ risk appetite. The S&P 500 and the Nasdaq reversed their weekly advances, while the blue-chip Dow ended the week nominally higher.

The Philadelphia SE Semiconductor index slid 3.0% in the wake of a Reuters report that Taiwan’s TSMC asked major suppliers to delay delivery of high-end chipmaking equipment. The news raised concerns about a potential slowdown in the global semiconductor industry, which is a key driver of economic growth.

On the economic front, data released on Friday was mixed, with import prices jumping, industrial production beating expectations, and University of Michigan consumer inflation expectations cooling. The data cemented expectations that the Federal Reserve will leave its key interest rate unchanged at the conclusion of next week’s monetary policy meeting, but it also fueled concerns that inflation may remain elevated for some time.

The Dow Jones Industrial Average fell 288.87 points, or 0.83%, to 34,618.24, the S&P 500 lost 54.79 points, or 1.22%, to 4,450.31, and the Nasdaq Composite dropped 217.72 points, or 1.56%, to 13,708.34.

European stocks closed higher, extending a rally sparked by the European Bank signaling an end to its rate-hiking cycle. The pan-European STOXX 600 index rose 0.23% and MSCI’s gauge of stocks across the globe shed 0.63%.

Emerging market stocks rose 0.33%. MSCI’s broadest index of Asia-Pacific shares outside Japan closed 0.58% higher, while Japan’s Nikkei (.N225) rose 1.10%.

Treasury yields rose ahead of the Federal Reserve policy meeting next week, with two-year yields edging above the 5% threshold amid worries that restrictive interest rates will be in place for longer than expected. Benchmark 10-year notes last fell 10/32 in price to yield 4.3304%, from 4.29% late on Thursday.

The dollar inched lower against a basket of world currencies, but nabbed its ninth straight weekly gain. The dollar index fell 0.08%, with the euro up 0.16% to $1.0658.

Oil prices continued to climb, notching their third consecutive weekly gain on supply tightness and optimism that the Chinese economy is gaining strength. US crude rose 0.68% to settle at $90.77 per barrel, while Brent settled at $93.93, up 0.25% on the day.

Gold prices surged, bouncing off three-week lows in opposition to softness in the greenback. Spot gold added 0.7% to $1,922.69 an ounce.

The US stock market’s sharp decline on Friday was a reminder of the fragility of investor sentiment and the potential for volatility in the coming weeks. The Fed’s policy meeting next week will be a key event, as investors look for clues about the central bank’s plans for future interest rate hikes.


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