S&P 500 Drops 2.7% As Tech Stocks Slide After Micron’s Report

Key Insights

• The disappointing report from Micron triggered a major sell-off in chip stocks. 
• The better-than-expected GDP data raised worries about a more hawkish Fed. 
• A successful test of the support at 3775 will open the way to the test of the next support level at 3745.

Micron’s Report Highlighted The Problems Of The Semiconductor Industry

S&P 500 tested multi-week lows as traders reacted to the better-than-expected GDP report and the disappointing earnings report from Micron.

The strong GDP data boosts chances for a more hawkish Fed. Interestingly, bond markets have mostly ignored the report, and Treasury yields were mostly flat in today’s trading session.

Micron’s results and guidance had a significant negative impact on tech stocks. The tech-heavy NASDAQ Composite was down by more than 3.5% as big names like NVIDIA and AMD fell by 8-9%.

Tesla, which declined by as much as 10%, was among the biggest losers in the S&P 500. Tesla doubled discounts for Model 3 and Model Y, raising concerns about the strength of demand for its cars. Tesla is trading at levels that were last seen back in September 2020.

Today’s sell-off is broad, and all market segments are under significant pressure. Traders stay worried about hawkish Fed and economic problems, and it looks that S&P 500 will need material positive catalysts to break the current trend.

S&P 500 Tests Support At 3775

S&P 500 is trying to settle below the support at 3775. RSI remains in the moderate territory, and there is plenty of room to gain additional downside momentum in case the right catalysts emerge. If S&P 500 manages to settle below 3775, it will head towards the next support level at 3745.

A move below the support at 3745 will push S&P 500 towards the next support at 3725. In case S&P 500 gets below 3725, it will move towards the 3700 level.

On the upside, S&P 500 needs to settle back above 3775 to have a chance to gain upside momentum in the near term. The next resistance level for S&P 500 is located at 3800. If S&P 500 moves above this level, it will head towards the resistance at 3815. A successful test of the resistance at 3815 will push S&P 500 towards the next resisance level at 3840.

For a look at all of today’s economic events, check out our economic calendar.