US chip stocks sink 3.8%, dragging Nasdaq lower despite solid data
A sharp selloff in semiconductor stocks pulled the Nasdaq down 1% even as healthy retail spending and benign inflation data reinforced expectations the Federal Reserve will keep rates unchanged this month.
The Nasdaq Composite fell 1% in early trading on Thursday as a broad selloff in semiconductor stocks offset resilient economic data. By 09:50 a.m. ET, the tech-heavy index had dropped 262.08 points to 26,007.14. The S&P 500 lost 0.39%, while the Dow Jones Industrial Average managed a 0.16% gain to reach 52,740.92.
Semiconductor equities bore the brunt of the selling pressure, with the Philadelphia SE Semiconductor index dropping 3.8%. Memory-chip makers suffered steep declines, with Western Digital and Seagate Technology both sliding 7.3%, and Micron Technology falling 4.8%.
U.S.-listed shares of TSMC lost 2.5% despite the advanced AI chipmaker posting strong quarterly results. "The chip rally is cooling off, but not because AI is losing steam, but because AI adoption still isn't fully widespread yet," said Shiraz Ahmed, founder and CEO at Sartorial Wealth Inc. As a result, heavy capex spending continues across the AI ecosystem, from energy to semiconductors.
Outside of technology, underlying economic indicators pointed to steady growth. June retail sales rose only marginally as lower gasoline prices reduced service station receipts, though consumers continued to hunt for bargains.
"Slower headline retail sales growth is actually positive, mainly because it reflects lower gasoline prices, not weaker consumer demand," said Bill Adams, chief U.S. economist at Fifth Third Commercial Bank. "The report is constructive for second-quarter real GDP." Labor markets also showed strength, with weekly jobless claims falling to 208,000 for the week ended July 11, beating forecasts.
The macroeconomic backdrop reinforced market expectations for steady monetary policy. Following benign June inflation reports earlier in the week, traders are pricing in an 88% probability that the Federal Reserve will keep interest rates unchanged at its upcoming meeting.
Corporate earnings drove significant individual stock movements. UnitedHealth raised its 2026 profit forecast, pushing its shares up 7.8% and lifting the overall healthcare sector by 2%. Conversely, GE Aerospace dipped 4.4% even after raising its own 2026 profit outlook.
Geopolitical tensions introduced fresh volatility into energy and transport markets. Oil prices surged amid reports that Iran asked Yemen's Houthi movement to prepare to close the Red Sea oil route if the U.S. strikes Iranian power infrastructure. The escalating risks weighed directly on United Airlines, which fell 2.8% as it cut its third-quarter and full-year profit outlooks due to higher fuel costs.
