Wall Street takes a hit from chip, internet stocks

Traders work on the floor of the New York Stock Exchange. (Reuters pic)

NEW YORK: The tech-heavy Nasdaq saw sharp declines on Thursday as internet stocks faltered for a second day on concerns about increased regulation, while a warning from KLA Tencor led a slide in chip stocks.

Chipmaker Micron sank 9% after Chief Financial Officer David Zinsner said prices of NAND chips declined in the third quarter and at least two brokerages said the markets for NAND and DRAM chips were worsening.

KLA Tencor tumbled 9%, and weighed on other chip equipment makers, after Chief Financial Officer Bren Higgins said September was still “a drought for DRAM” and that a pick-up in business later this year would be less than expected.

The Philadelphia SE Semiconductor index slid 2.2%, led by Micron and KLA Tencor.

Facebook and Twitter executives defended their companies before skeptical US lawmakers on Wednesday and the US Department of Justice said it would discuss, at a meeting on Sept 25, concerns that social media platforms are “intentionally stifling the free exchange of ideas”.

Facebook fell 2.7%, Twitter dropped 2.1%, Alphabet slipped 1.8% and Snap was down 2.3%, hitting a fresh record low.

The losses, along with those in chip companies sent the S&P 500 technology index down 1.32%, the most among the major 11 S&P sectors.

“As a shareholder, anytime regulation is brought up that impacts your profitability,” said Kim Forrest, senior portfolio manager at Fort Pitt Capital Group in Pittsburgh.

“A lot of the chip stocks rose dramatically earlier this year … there is some undercurrent that tariffs might affect some of those stocks.”

Investors were keeping an eye on trade developments as a public comment period, on the Trump administration’s plan for fresh tariffs on US$200 billion (RM827 billion) in Chinese imports, ends on Thursday. China has warned of retaliation if Washington implements any new tariff measures.

US-Canada talks on the North American Free Trade Agreement also continue.

At 11.23am ET, the Dow Jones Industrial Average was down 50.75 points, or 0.20%, at 25,924.24, the S&P 500 was down 15.74 points, or 0.54%, at 2,872.86 and the Nasdaq Composite was down 83.19 points, or 1.04%, at 7,911.98.

Four of the 11 major S&P sectors were higher, led by a 0.23% rise in the real estate index and a 0.20% gain in the industrial sector.

Among the bright spots, Netflix rose 2.1% after RBC raised price target on the stock and a survey by the brokerage showed higher penetration levels in the United States and United Kingdom.

Declining issues outnumbered advancers for a 1.59-to-1 ratio on the NYSE and for a 1.65-to-1 ratio on the Nasdaq.

The S&P index recorded 34 new 52-week highs and eight new lows, while the Nasdaq recorded 72 new highs and 35 new lows.