NASDAQ Composites Falls for Fifth-Straight Sessions on Weak Chip Sector, Interest Rate Fears

The tech-weighted NASDAQ Composite is losing ground for the fifth straight session late Thursday as chipmakers dropped, led by a tumble in shares of Nvidia and a fall in Advanced Micro Devices after the United States imposed an export ban on some top AI chips to China.

The index fell on the cash market opening, but the selling pressure eased after U.S. economic data showed a further easing in price pressures, while manufacturing grew steadily in August, thanks to a rebound in employment and new orders.

At 18:12 GMT, the NASDAQ Composite is trading 11785.13, down 31.08 or -0.26%. The Invesco QQQ Trust ETF (QQQ) is at $299.43, up $0.16 or +0.05%.

The current sell-off began last Friday after Fed Chairman Jerome Powell signaled the central bank will remain aggressive raising rates to fight inflation even after consecutive hikes of 75 basis points, a message echoed by other Fed officials in recent days.

Near the close of the session, traders were expecting a 74.0% chance of a third straight 75 basis points increase in rates in September and expect it to peak around 3.993% in March 2023.

Nvidia, Advanced Micro Devices Sink Chip Sector after U.S. Restricts China Sales

U.S. chip stocks tumbled on Thursday, with the main semiconductor index down more than 3% after Nvidia and Advanced Micro Devices said U.S. officials told them to stop exporting cutting-edge processors for artificial intelligence to China, Reuters reported.

Nvidia’s stock plummeted 11%, on track for its biggest one-day percentage drop since 2020, while smaller rival AMD’s stock fell almost 6%.

The restricted exports to China of two of Nvidia’s top computing chips for artificial intelligence – the H100 and A100 – could impact $400 million in potential sales to China in its current fiscal quarter, the company warned in a filing on Wednesday.

AMD also said U.S. officials told it to stop exporting its top artificial intelligence chip to China, but it does not believe the new rules will have a material impact on its business.

Solid Economic News Supports Fed’s Plan to Raise Rates Aggressively

In economic news, a government report showed that the number of Americans filing new claims for unemployment benefits declined further last week, consistent with strong demand for workers and tight labor market conditions.

In other news, data from the Institute for Supply Management (ISM) showed U.S. manufacturing grew steadily in August as employment and new orders rebounded, while a further easing in price pressures strengthened expectations that inflation has likely peaked.

Looking Ahead…

Investors now await the monthly nonfarm payrolls report on Friday for more evidence on the labor market. Economists polled by Reuters see a jobs increase of 300,000, while Wells Fargo economy Jay Bryson revised his forecast for nonfarm payrolls to 375,000 from 325,000 and Morgan Stanley economist Ellen Zentner expects August payrolls of 350,000.