Chipmakers’ decline weighs on Wall Street stocks at opening

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Wall Street experienced a slight decline on Friday as the chipmaking sector suffered, while Europe and Asia saw a rally due to positive Chinese economic data.

At the New York opening bell, the S&P 500, Wall Street’s benchmark, fell 0.4%, and the tech-focused Nasdaq Composite declined 0.3%.

Applied Materials and Lam Research, US chip equipment makers, saw a decrease of 3.1% and 2.5% respectively after TSMC, the world’s top chipmaker, requested a delay in the delivery of high-end chipmaking equipment from its major suppliers.

On Friday, the Philadelphia Semiconductor index, which tracks 30 of the largest semiconductor manufacturers globally, fell 1.4%.

These declines followed a day of nearly 1% gains for both the S&P and Nasdaq Composite, attributed to the successful debut of chip designer Arm in New York, which saw a 25% increase in value on its first trading day.

Arm opened the market on Friday with a 6% gain, and its listing, backed by SoftBank, marked Wall Street’s largest initial public offering in almost two years, resulting in a market capitalization exceeding $65 billion.

Meanwhile, Europe’s Stoxx 600 index rose 0.6% and approached its highest level in over a month, fueled by indications that eurozone interest rates may have reached their peak.

The Cac 40 in Paris increased 1.2%, the Dax in Frankfurt rose 0.7%, and the FTSE 100 in London gained 0.6%.

The European Central Bank had raised rates by a quarter percentage point to an all-time high of 4% the day before but suggested that the current level could be sufficient to address inflation concerns.

Investor sentiment was also boosted by official data from China revealing higher-than-expected retail sales and industrial production growth in August.

In Europe, consumer cyclical and basic materials stocks led gains, rising by 2.2% and 1.3% respectively, as these sectors are particularly sensitive to Chinese consumer spending expectations. The Stoxx Europe luxury index advanced 2.5%, with LVMH, a retail giant listed in Paris, experiencing a 3.5% increase.

In Asia, Hong Kong’s Hang Seng rose 0.8% and Tokyo’s Topix gained 1%. China’s CSI 300 index briefly rallied after the data release but ended the day down 0.7%.

China’s economy has faced challenges in its recovery following the lifting of zero-Covid measures last year, and investors are keen to observe whether recent stimulus efforts are yielding positive results.

“There’s a growing sense of optimism among a cohort of investors who believe that Beijing’s recent initiatives to stimulate the economy and stabilize financial markets are showing signs of success,” said Stephen Innes, managing partner at SPI Asset Management.

However, Innes added that “a single month of positive data isn’t sufficient to confirm a sustained path to recovery.”

The data release followed the People’s Bank of China’s decision to cut banks’ reserve requirement ratio by 0.25 percentage points to 7.4%, injecting approximately Rmb500bn ($70bn) in liquidity for lenders.

Goldman Sachs analysts noted that this move would help offset the recent surge in local government bond issuance, which drained liquidity from the banking system and increased interbank lending costs.

“Injecting liquidity through the reserve requirement ratio cut would help suppress interbank interest rates amid high liquidity demand, and ensure low funding cost for banks,” the analysts wrote.