Tech Stocks Leading Significant Pullback On Wall Street

After trending higher over the past few sessions, stocks have shown a significant move back to the downside during trading on Wednesday. The Nasdaq has led the pullback amid substantial weakness among technology stocks.

Currently, the Nasdaq is down 434.46 points or 2.4 percent at 18,074.88 and the S&P 500 is down 64.26 points or 1.1 percent at 5,602.94. The narrower Dow, on the other hand, has bucked the downtrend and is up 102.05 points or 0.3 percent at 41,056.53.

Semiconductor stocks are turning in some of the market’s worst performances on the day, resulting in a 4.0 percent nosedive by the Philadelphia Semiconductor Index.

The sell-off by semiconductor stocks comes after a report from Bloomberg said President Joe Biden’s administration is considering tougher trade rules against companies in its chip crackdown on China.

Bloomberg said the administration has told allies that it’s considering using the most severe trade restrictions available if companies continue giving China access to advanced semiconductor technology.

Citing people familiar with recent discussions, Bloomberg said the U.S. is mulling whether to impose a measure called the foreign direct product rule, which lets the country impose controls on foreign-made products that use even the tiniest amount of American technology.

Negative sentiment was also generated after former President Donald Trump suggested Taiwan should pay the U.S. for defense, claiming the country took “about 100%” of America’s chip business.

Computer hardware and software stocks are also seeing considerable weakness, contributing to the steep drop by the tech-heavy Nasdaq.

Retail, gold and transportation stocks have also moved to the downside on the day, while notable strength is visible among interest rate-sensitive utilities and commercial real estate stocks.

In U.S. economic news, the Commerce Department released a report showing a significant rebound by new residential construction in the U.S. in the month of June.

The report said housing starts shot up by 3.0 percent to an annual rate of 1.353 million in June after plunging by 4.6 percent to a revised rate of 1.314 million in May.

Economists had expected housing starts to jump by 2.6 percent to a rate of 1.310 million from the 1.277 million originally reported for the previous month.

The Commerce Department said building permits also surged by 3.4 percent to an annual rate of 1.446 million in June after tumbling by 2.8 percent to a revised rate of 1.399 million in May.

Building permits, an indicator of future housing demand, were expected to rise by 0.3 percent to an annual rate of 1.390 million from the 1.386 million originally reported for the previous month.

A separate report released by the Federal Reserve showed industrial production in the U.S. increased by more than expected in the month of June.

The Fed said industrial production climbed by 0.6 percent in June after jumping by 0.9 percent in May. Economists had expected industrial production to rise by 0.3 percent.

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance during trading on Wednesday. Japan’s Nikkei 225 Index fell by 0.4 percent, while Hong Kong’s Hang Seng Index inched up by 0.1 percent.

The major European markets have also turned mixed on the day. While the German DAX Index is down by 0.2 percent, the French CAC 40 Index is up by 0.2 percent and the U.K.’s FTSE 100 Index is up by 0.3 percent.

In the bond market, treasuries are seeing modest weakness after moving notably higher in the previous session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is up by 1.4 basis points at 4.182 percent.

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