Nasdaq slips as chip maker Micron’s warning sparks tech crash

Traders work on the trading floor of the New York Stock Exchange (NYSE) in Manhattan, New York City, U.S., August 8, 2022. REUTERS/Andrew Kelly

Aug 9 (Reuters) – The tech-heavy Nasdaq fell on Tuesday as a bad forecast from Micron Technology dragged down chip and technology stocks, as investors remained cautious ahead of inflation data feeding into the U.S. Federal Reserve’s rate hike plans.

Wednesday’s strong inflation print, following last week’s strong jobs numbers, will prompt the Fed to continue its jumbo rate hike and weigh on the recent recovery in stocks.

Traders see a 70% chance that the Fed will raise interest rates by 75 basis points in September, the third major increase. IRPR

Ratings-sensitive growth and technology stocks slipped as U.S. Treasury yields rose, with megacaps such as Alphabet Inc ( GOOGL.O ) and Tesla Inc ( TSLA.O ) each down more than 1 percent.

Three of the 11 major S&P 500 sectors fell in premarket trading, with consumer discretionary (.SPLRCD), information technology (.SPLRCT) and communications services (.SPLRCL) settling between 0.8% and 1.4%.

Micron Technology Inc ( MU.O )’s 2.4% slide came as the memory-chip maker cut its fourth-quarter revenue forecast and warned of negative cash flow next quarter as demand for chips used in personal computers and smartphones declines. Read more

The broader Philadelphia Semiconductor Index ( .SOX ) fell 2.8% for the third straight session, while peers Nvidia ( NVDA.O ) and Advanced Micro Devices ( AMD.O ) each slipped more than 2%, leading to the biggest losses since the previous session. Earnings warning from Nvidia.

“Markets still see these things as company-specific. If you get enough similar warnings, investors will see it as sector-specific,” said Michael Schaul, CEO of Marketing Field.

Schaul said trading volumes are low because of the summer and “really doesn’t take a lot of capital to push the yield or the S&P.”

At 9:41 a.m. ET, the Dow Jones Industrial Average (.DJI) was up 10.35 points, or 0.03%, at 32,842.89, the S&P 500 (.SPX) was up 9.53 points, or 0.23%, at 4,130.5q, and the Nasdaq Composite (.IXIC) It was down 118.43 points, or 0.94%, at 12,526.03.

Despite a healthy recovery since mid-June, the benchmark index (.SPX) is down 13.4% this year after hitting a record high in early January, amid rising rates, hawkish central banks, and geopolitical tensions.

Stronger-than-expected earnings from corporate America turned positive, with 77.5% of S&P 500 companies beating earnings estimates as of Friday, according to Refinitiv data.

U.S. vaccine maker Novavax ( NVAX.O ) fell 25.3 percent after cutting its annual revenue forecast in half this year as it does not expect additional sales in the United States due to the COVID-19 hit on global supply and soft demand. Read more

Declining issues outpaced promoters for a 1.28-to-1 ratio on the NYSE and a 1.96-to-1 ratio on the Nasdaq.

The S&P index hit two new 52-week highs and 30 new lows, while the Nasdaq hit 22 new highs and 17 new lows.

Reporting by Bansari Mayur Kamdar and Aniruddha Ghosh in Bengaluru; Editing by Saumyadeb Chakrabarty and Arun Koyyur

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