The S&P 500 and Nasdaq fell on Wednesday as a grim outlook from Target spurred fresh concerns for retailers heading into the crucial holiday season, while Micron’s supply cut triggered a selloff in the chip sector.
Meanwhile, Micron Technology Inc (MU.O) said it will reduce memory chip supply in 2023 and make more cuts to its capital spending plan, as it struggles to clear excess inventory due to a demand slump.
Shares of other chip stocks such as Intel Corp (INTC.O), Advanced Micro Devices (AMD.O), Applied Materials (AMAT.O) and Lam Research (LRCX.O) fell between 2% and 6%, weighing heavily on the tech-heavy Nasdaq.
“There are two things weighing on market sentiment; you’re seeing softer demand in two sectors with Target in the retail sector and Micron with the chips,” said Dennis Dick, market structure analyst and trader at Triple D Trading, highlighting Micron’s drag on other chipmakers.
Investors will also keep an eye on chipmaker Nvidia Corp’s (NVDA.O) earnings, which is expected later in the day.
Despite the sales warning from Target, data showed U.S. retail sales increased more than expected in October, boosted by purchases of motor vehicles and suggesting that consumer spending remained stable.
The data and earnings reports come on the heels of upbeat quarterly results from Walmart Inc (WMT.N) on Tuesday that had added to market optimism driven by a softer-than-expected producer prices report.
All the three main indexes ended higher in the previous session as geopolitical worries were overshadowed by expectations that the improved inflation outlook would allow the Federal Reserve to shift to smaller interest rate hikes as soon as December.
Several Fed officials have also signaled that the central bank could slow its pace of tightening while stressing the need to continue to raise borrowing costs to stamp out high inflation.
San Francisco Federal Reserve Bank President Mary Daly on Wednesday said it is reasonable for the U.S. central bank to raise its policy rate to the 4.75%-5.25% range by early next year, with a 5% policy rate as a “reasonable starting point.”
At 13:04 a.m. ET, the Dow Jones Industrial Average (.DJI) was up 18.28 points, or 0.05%, at 33,611.20, the S&P 500 (.SPX) was down 20.36 points, or 0.51%, at 3,971.37, and the Nasdaq Composite (.IXIC) was down 124.92 points, or 1.10%, at 11,233.49.
Declining issues outnumbered advancers for a 1.73-to-1 ratio on the NYSE and for a 2.23-to-1 ratio on the Nasdaq.
The S&P index recorded three new 52-week highs and two new lows, while the Nasdaq recorded 50 new highs and 104 new lows.