Financial Analyst/Content Writer, RADEX MARKETS
Lawrence J. came from a strong technical and engineering background before pivoting into a more financial role later on in his career. Always interested in international finance, Lawrence is experienced in both traditional markets as well as the emerging crypto markets. He now serves as the financial writer for RADEX MARKETS.
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Semiconductor stocks have been run into the ground so far this week. The pain started on Monday when anti-AI sentiment reared its ugly head to obliterate all the usual suspects listed in New York, before carrying over to the Far East on Tuesday and then maintaining enough momentum throughout the day to sweep through Western markets a second time. Yesterday may as well have been judgement day as far as semiconductors were concerned, with every company even remotely associated with the sector getting systematically destroyed. Japanese giants Tokyo Electron and Advantest both incurred double-digit losses on Tuesday morning, South Korean chipmaking rivals Samsung and SK Hynix fell 13% and 15% respectively, while Taiwan Semiconductor Manufacturing Company (TSMC) shed 3%. The selloff spread to Europe, where ASML fell for the second day running on the Amsterdam stock exchange after losing 8.5% on Monday, before reaching US shores and causing mayhem on Wall Street for the second day running. A number of companies have incurred truly shocking losses so far this week. SanDisk (SNDK) has been hammered no less than 24% since Monday; AMD is down 13%; Seagate (STX) is down 12%; Western Digital (WDC) and Micron (MU) are both 11% in the red.
While harrowing, the damage was strictly confined to the semiconductor sector, with the wider US indices largely shrugging off the panic that has pervaded the chipmaking scene. Even the Nasdaq 100 itself (NDX) only faltered 1% when all was said and done, while the S&P 500 (SPX) and Dow Jones (DJI) managed to close yesterday’s session in the green. The same cannot be said for the Korean Kospi index, which is afflicted by rather idiosyncratic quirks. The Kospi suffers from extreme concentration, whereby Samsung and SK Hynix together account for half of the index’s market cap, despite including over 800 companies in total. The benchmark is also beset by leveraged ETFs, which comprise a significant percentage of the stock exchange’s trading volume. Combined, these features are having disastrous consequences for the South Korean index, which plummeted 11% yesterday and has collapsed a staggering 35% over the last six weeks.
The lull in military activity between the US and Iran continued to drag crude oil prices lower on Tuesday, with the Brent Crude benchmark falling to $84 per barrel and WTI contracts closing only marginally lower. As always, reliable information has not been forthcoming and the situation remains murky. With or without a peace deal, global demand for oil remains low, while markets are aware that OPEC still has plenty of capacity to increase production. Oil producing nations are also stepping up efforts to improve supply chain resilience, particularly around the middle east, with countries investing in new pipelines and exploring alternative sea routes. Peace talks between Russia and Ukraine may also be on the cards after a meeting between Zelensky and Trump raised the possibility of reopening a line of dialogue with Vladimir Putin. A conclusion to hostilities on that end introduces the possibility of sanctions being lifted against Russian oil exports, further alleviating supply concerns.
The latest interest rate decision from the Federal Reserve is mere hours away, and markets are still not sure what that decision will be. As it stands, traders are eyeing it up as a toss-up between a hold and a hike, with FedWatch leaning 70-30 in favour of the former, which is an uncommonly noncommittal split this close to the line. Suffice to say a surprise rate hike would introduce even more volatility into already chaotic markets. Traders are on edge and have every right to be so. The US dollar is looking strong even without moving interest rates; an adjustment to the upside may send the DXY into territory not explored in many moons. Aside from that, the earnings calendar steps into overdrive later today, with Microsoft (MSFT) and Meta Platforms (META) reporting after the US session closes and Apple (AAPL) and Amazon (AMZN) reporting tomorrow. On top of the above, any surprise announcement regarding Iran, Russia, or even crypto for that matter could send markets flying with very little warning.
About the Author
Lawrence J. came from a strong technical and engineering background before pivoting into a more financial role later on in his career. Always interested in international finance, Lawrence is experienced in both traditional markets as well as the emerging crypto markets. He now serves as the financial writer for RADEX MARKETS.
Reviewed by RADEX MARKETS
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