S&P 500 Index: Chip Stocks Slide Again as the Dow Leads Earnings Rotation

Chips Are Back Under Pressure

Tuesday’s market has a different feel from Monday’s rebound. The Dow is doing the lifting. The Nasdaq is barely holding a gain, and the chip group is back under pressure. Micron, Sandisk, Seagate, Intel and AMD are all lower. CoreWeave is lower again after failing to hold its upgrade bounce.

Monday gave the AI names a chance to stabilize after last week’s selling. The bid did not carry into Tuesday. The semiconductor ETF is lower and the market is back to selling the names that led the run higher. That keeps the pressure on the Nasdaq even with the broader averages green.

At 14:15 GMT, the Dow Jones Industrial Average is trading 52,361.95, up 395.93 or +0.76%. The Nasdaq Composite is at 26,467.61, up 36.72 or +0.14%, while the S&P 500 Index is trading 7,716.45, up 25.72 or +0.33%.

Daily December E-mini S&P 500 Index Futures Technical Analysis

December E-mini S&P 500 Index futures are trading lower on the opening after yesterday’s strong rebound rally. The market is trading inside yesterday’s trading range, which suggests trader indecision.

The main trend is down according to the daily swing chart. A trade through 7672.75 will signal a resumption of the downtrend. The main trend changes to up if buyers recapture the swing top at 7887.00.

The minor trend is also down. A trade through 7809.50 will change the minor trend to up.

The key retracement zone controlling the direction of the trade is 7736.25 to 7698.25. The next retracement zone is 7786.75 to 7813.00.

On the downside, retracement zone support is 7632.00 to 7584.00.

The 50-day moving average at 7772.42 is controlling the momentum.

Day-traders will be watching the reaction to the retracement zone at 7736.25 to 7698.25. We could see an intraday upside bias develop on a sustained move over 7736.25. Downside pressure could resume if 7736.25 can’t hold. A move through 7698.25 could lead to a quick test of 7676.00 and 7672.75.

The AI Trade Did Not Get a Clean Reset

Elice falling more than 30% in its public debut added to a market that was already nervous about the AI build-out. The stock did not create the concern. It landed in the middle of one.

CoreWeave remains the pressure point. Goldman Sachs upgraded the stock after last week’s 25% loss, and the shares initially bounced. The recovery faded before the close and the stock is lower again Tuesday. Buyers had an upgrade. They could not keep the stock higher.

That is the trade. The group can still bounce when sellers get tired. It has not shown that it can hold a bid once the opening enthusiasm wears off. Intel, AMD and Micron are all lower again. Traders are not treating Monday as the start of a new move higher.

The Dow Has the Better Side of the Tape

The Dow is up more than 390 points while the Nasdaq is nearly flat. Money is moving toward stocks with earnings in hand and away from the expensive part of the technology trade.

RTX is higher after beating on earnings and revenue. 3M is also higher after an earnings beat. General Motors beat expectations, raised its cash-flow outlook and announced a $20 billion buyback program. The stock is still lower.

Northrop Grumman is higher after beating earnings despite a small revenue miss. GE Aerospace is lower after its cash flow came in short. Steel Dynamics is lower after missing on earnings and margins. Buyers are paying for clean numbers. Everything else is getting sold.

Apple is also lower after a downgrade at Loop Capital. The call centered on slowing iPhone sales and valuation. Apple is not an AI financing trade, but the stock is another reminder that traders are less willing to overlook a stretched price when the technology group is under pressure.

Lower Yields Are Helping, but Not Enough for Chips

Treasury yields moved lower after September housing starts missed expectations. The 10-year yield fell back near 5.09%. That is helping the S&P 500 hold a gain, but it has not brought buyers back to the semiconductors.

The market is looking ahead to next week’s Federal Reserve meeting. FedWatch has the odds favoring a hold. Traders will also get the Fed’s preferred inflation gauge later in the week. The bond market is offering the equity market some relief. The chip group is not taking it.

Asia did not offer much help overnight. South Korea’s Kospi dropped sharply, Japan’s Nikkei fell and Australia also finished lower. The weakness showed up again in U.S. chip shares before the opening.

What to Watch

The chip group needs to stop giving back every early bid. CoreWeave is still the stock to watch after Monday’s failed recovery. The broader market can hold together with the Dow and industrials doing the work, but the Nasdaq needs the semiconductors to stop leaking before traders will trust another AI bounce.

My bias is to the downside because the main and minor trends are down and the market is trading on the bearish side of the 50-day moving average.

More Information in our Economic Calendar.