The S&P 500 is down 0,2% this Monday, while investors track a sharp decline in semiconductor stocks. The move interrupted gains posted early in the session, supported by the drop in international oil prices.
The Nasdaq Composite is also trading down 0,2%, while the Dow Jones Industrial Average is posting a decline of 0,4%. Earlier, stocks rose as much as 143 points, about 0,3%, before losing momentum.
Pressure is more evident among chip companies. The VanEck Semiconductor ETF (SMH) is down more than 3%, extending the losses recorded on Friday.
AMD is down 7%, while Teradyne is losing about 5%. Micron Technology is also posting a decline close to 4%, amid a broad sell-off in semiconductor manufacturing-related stocks.
Chipmakers had started the session higher after the strong debut of China's CXMT on the Shanghai Stock Exchange. The move, however, lost momentum amid concerns over competition and technological advances in China.
“There is a lot of uncertainty about what is happening with Chinese companies,” Thomas Martin, senior portfolio manager and partner at Globalt Investments, told CNBC. “There is a lot of competition and technological advances... in very competitive product markets.”
Stocks came under additional pressure after reports that China began developing deep ultraviolet lithography machines, used in semiconductor manufacturing. The possibility increased concerns about Chinese technological capacity.
ASML, the global leader in chipmaking equipment, is down more than 7% in trading in the United States after the information was released.
Investors are also assessing signs of weakness in stocks related to artificial intelligence. For Martin, the distance from the record highs posted at the end of June shows that the market is more cautious.
“There is enormous uncertainty in the technology world,” Martin added. “There is a lot of uncertainty among investors about how this will unfold and whether they want to reallocate part of their money.”
Oil falls and changes stock markets' direction
Easing tensions in the Middle East is causing a sharp drop in oil prices. Brent futures contracts for September are down 6,8%, to approximately US$ 90,25 per barrel.
WTI, the benchmark in the United States, is down 6,1%, to US$ 83,83. The drop initially helped stock markets, but pressure on technology stocks came to dominate trading.
The week still holds major corporate earnings. Amazon, Apple, Meta Platforms and Microsoft will release their results, which could influence investors' perception of spending by large companies on artificial intelligence.
The results may also directly affect semiconductor manufacturers, which have benefited from increased investment in AI infrastructure.
In addition, the Federal Reserve will announce its latest interest rate decision on Wednesday. Although the consensus points to a possible hike in September, the market is also considering the possibility of a 0,25 percentage point increase as early as this week, according to the CME FedWatch tool.
Software and semiconductors diverge
Another move observed during the session involves the separation between software and semiconductor stocks. The iShares Expanded Tech-Software ETF is trading higher, while the iShares Semiconductor remains lower.
The divergence has become more frequent in recent months. The two ETFs posted opposite moves in 32 of the last 60 sessions, the highest cumulative number since the funds were created in 2001.
The 60-day rolling correlation between the ETFs also fell to near zero, well below the historical average of approximately 0,75. Despite this, both are up about 7% or more over the last three months, outperforming the S&P 500 over the period.