Chip makers take big hit, Trump Trade signs: Market Trends

Big Tech, specifically the semiconductor industry, was dealt a big blow in trading as chip giants like Nvidia (NVDA), Taiwan Semiconductor Manufacturing Company (TSM), and ASML Holding (ASML) sank in the day's session. Signs of a so-called "Trump Trade" are ringing throughout Wall Street, specifically with interest in M&A activity which could see a pullback if the former president were to assume office for a second term.

Yahoo Finance markets reporter Josh Schafer joins Asking For A Trend to break down the latest market trends for July 17.

For more expert insight and the latest market action, click here to watch this full episode of Asking for a Trend.

This post was written by Nicholas Jacobino

Video Transcript

The rotation out of high flying tech stocks continues.

Concerns of risk to tech names eclipsing high hopes for Fed rate cuts.

Yeah, finance.

His very own Josh Scaff joins us here with more on the trading day takeaways.

Joshua?

Yeah, Josh, we got to start with Tech.

That was the big story of the day.

So I'm gonna flip over the Wi Fi Interactive here and take a closer look at what we saw.

So as you mentioned earlier in the show, we obviously had that report out about the Biden administration, potentially putting stricter restrictions on what would impact a lot of ship makers.

Business with China.

You can see here it really took a lot of tech, too.

But specifically when you take a look at the semis, I mean, it was really a bloodbath in there.

It was not good for the semis today, and I think the interesting thing is just how that sort of impacts the overall index.

Now we should mention this happened right around this time last year.

There were reports, too, about NVIDIA potentially having trouble in China.

And if I pull up the NVIDIA chart and we go back a year.

I think we'll be able to see it.

If we go back a year, you'll see that you've got to pull back last August a little bit there and then end up rallying back out of it.

And really, what that was was earnings.

And we're coming up on big tech earnings, right?

So we had a big tech sell off today.

We know there's been that rotation out of Tech, but you sort of have the fundamental driver of this rally still coming at some point in the next couple of weeks with earnings and video doesn't report until the end of August.

So it'll be interesting to see sort of how these stocks trade going into earnings.

We know they're up a lot, but there will be kind of more fundamental backing coming at some point.

Yeah, because S MH I mean, the ETF that tracks the chips.

You know, it slipped today, but it also I mean, when you pull back that chart, Josh, the move even to after today I mean, it's like 45% this year, right?

We're We're talking about stocks, stocks that are mostly up over 100% this year, over 100% in the last year, having a 5% fall back.

There's still some serious gains there, right?

And then the other side of this, though, was it wasn't really a bad day everywhere.

And I thought this was interesting.

I was taking a look at just the sector action today.

And when you look at what we had throughout the day, I mean, you have five sectors in the green eight sectors outperforming or sorry, six sectors in the green, eight sectors outperforming the S and P 500.

But this is your big one, right?

Tech falls almost 4% and you have communication services following 1.5%.

These are the bigger sectors in the S and P 500.

So we talk a lot about this rotation, right?

The rotation out of tech into a lot of these names.

But I wanna pull up a chart for you.

So we just talked about something like energy, something like utilities.

Right when we look at the weighting of the S and P 500.

So this is how much it contributes to the index.

Look at how big tech is.

So if tech falls almost 4%.

It's a tough day for the S and P 500 to set a new record.

And I think that's kind of the trend to focus on moving forward here.

And we keep talking about this rotation.

That means it's probably gonna be a slower chug higher for markets when the big companies are doing really well.

You have what we had to start the year.

Now it's gonna be a little bit of push and pull, I think, which would be more interesting to follow with With what work today.

Did you see you got any threads connecting?

What?

What worked?

Yeah.

I mean, when you take a look at the sectors, largely it was still the rates trade, right?

You have a lot of interest rate sensitive sectors in the green.

Here you have sectors that have underperformed excel RE, consumer staples, healthcare.

All haven't been great sectors performance wise over the last two years.

So to see them sort of keep outperforming, I think shows perhaps people still looking for laggards, right?

And a a final point on this Josh that I thought was interesting that Callie Cox brought up, uh to me overs wealth management.

She just said For index investors, it's important to remember on days like this how much you've gained already from big tech over the last two years, the index is up about 18% this year.

That's a pretty good year.

So if we just kind of do this teetering and tottering for a couple of months, you're still sitting on 18% gains, which you know isn't all bad.

All right, Final final Trump trade signs of the Trump trade, right?

We've been talking a lot about it, and I thought this was an interesting one.

So Eric Wallerstein, the chief market strategist over at Yardeni Research, highlighted this on X today, and he said, This is sort of one part of the Trump trade he's been watching.

So we're looking at Mazard and Evercore.

They're big players in M and a you look at their stocks.

They're up about 10% over the last five days.

Of course, the last five days is when we're talking about people feeling more confident that Trump might win this election and sort of markets pricing that in Well, this is one way to think about that.

If Trump were to come into office, the general theory goes, M and a will be a little bit easier.

There'll be perhaps less restrictions with the Republican, uh, in office.

And so you see a rally there.

I think it it will be interesting reading into November as we sort of get perhaps more confident or less confident with who's gonna be in office.

What starts to outperform in little pockets like this, I thought was kind of an interesting thing to highlight.

Yeah, it's interesting because, you know, elections coming up.

So everybody tries to sort of gain that out, which I get, And it's it's a fun, smart thing to do.

It's just so hard, though, Jack, because even with the in the deal making, um, you know, Look, let's say I mean, you have to give the edge to Trump Vance right now And so you would initially think, OK, Republican good for deal making.

But on the other hand, you know Senator Vance when he talks about Lina Khan, he has nice things to say.

So, I, I don't that it's just it's tough to game out.

No.

Yeah, And people often aren't right, right when they try and guess what sector is gonna out.

Here's one for you, Josh.

What sector outperformed is the same sector that led the S and P 500 through the last three presidencies.

Give it to me, Technology.

That's a secular trend, right?

It didn't matter if it was Obama.

If it was Biden or if it was Trump, it was just technology reading the S and P 500 higher.

You didn't have to think too hard about it.

That's it.

That's your portfolio.

There you go.

Thank you, Joshua.