NEW YORK (AP) 鈥� Wall Street鈥檚 record-breaking rally ran into a wall, as worries about potentially worsening trade tensions with China hit stocks of chip companies. That dragged indexes to their worst day in months on Wednesday, but conditions were less discouraging underneath the surface. The S&P 500 dropped 1.4%. The Nasdaq composite slumped 2.8%, its worst day since 2022, weighed by losses for Nvidia, Apple and other heavyweights. Slightly more stocks rose than fell in the S&P 500, and the Dow Jones Industrial Average added 0.6% to its record set a day earlier.
THIS IS A BREAKING NEWS UPDATE. AP鈥檚 earlier story follows below.
NEW YORK (AP) 鈥� Wall Street's record-breaking rally is running into a wall Wednesday, as worries about potentially worsening trade tensions with China hit stocks of chip companies. That鈥檚 dragging indexes to their worst day in months, but conditions may be less discouraging underneath the surface.
The S&P 500 dropped 1.3% a day after it set an all-time high for the 38th time this year. The Nasdaq composite slumped 2.6% and was on track for its worst day since 2022, also weighed by losses for such as and Apple.
But more stocks in the S&P 500 were still rising than falling, and the Dow Jones Industrial Average was adding 234 points, or 0.6%, to its record set a day earlier, as of 3:20 p.m. Eastern time.
The mix offers a continuation of a recent trend that market watchers have called encouraging, one where more stocks are rising rather than just a handful of overpowering elites. The smaller stocks in the Russell 2000 are coming off a big five-day winning streak on hopes that and the will avoid a recession, though the index fell 0.8% Wednesday to give back some of those gains.
The market's spotlight was squarely on chip companies, which tumbled after a report from Bloomberg News said President Joe Biden is considering the most severe trade restrictions available if companies like the Netherlands鈥� and Japan鈥檚 Tokyo Electron continue to ship advanced semiconductor technology to China. The U.S. government has to advanced chips and the equipment to make them, citing security concerns, and urged its allies to follow suit.
ASML saw its stock trading in the United States drop 12.7% even though it reported sales for the spring that came in at the high end of its forecasted range. Shares of Tokyo Electron, meanwhile, dropped 7.5% in Tokyo to cull its gain for the year to 32.2%.
Another major chip company, Taiwan Semiconductor Manufacturing Co., sank after former President Donald Trump criticized the self-governed island claimed by Beijing, which the U.S. is obligated by treaty to defend if it is attacked.
鈥淭aiwan should pay us for defense,鈥� Trump said according to a transcript of an interview published by Bloomberg. 鈥淭aiwan took our chip business from us, I mean, how stupid are we?鈥� he said.
TSMC鈥檚 stock trading in the United States dropped 7.3%.
Reverberations reached chip stocks around the world, including big U.S. players that have been some of Wall Street鈥檚 biggest stars this year amid a . Nvidia fell 6.1% after soaring 155.2% this year through the day before.
Advanced Micro Devices fell 8.8%, and Broadcom dropped 7%.
Big Tech stocks' movements have an outsized effect on indexes like the S&P 500, which give more weight to companies of bigger size. That was a boon in recent years, when a small group of companies known as 鈥渢he Magnificent Seven鈥� was able to soar almost regardless of what the overall economy and interest rates were doing. That helped mask weakness underneath the surface as the economy struggled through high interest rates meant to .
Now, though, some critics call those Magnificent Seven stocks too expensive, and investors are creeping back into unloved areas of the market. The economy has remained remarkably resilient so far, with the job market remaining solid, and investors widely expect the Federal Reserve to begin cutting interest rates in September because .
鈥淢arkets cannot continue indefinitely higher on the backs of just a handful of stocks,鈥� said JJ Kinahan, CEO of IG North America.
Johnson & Johnson, whose stock had been down for the year so far, jumped 3.7% after topping analysts鈥� forecasts for profit in the latest quarter. It was one of the largest reasons the Dow Jones Industrial Average was able to rise despite falls for each of the Magnificent Seven stocks: Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia and Tesla.
U.S. Bancorp, which has also lagged the rest of the market this year, rallied 4.4% after topping analysts鈥� forecasts for profit and revenue.
On the losing side of Wall Street was , a retailer targeting teens and tweens with products priced at $5 or below. It tumbled 24.3% after its CEO, Joel Anderson, stepped down from his job and from the board. It also gave a profit forecast for the second quarter that fell short of analysts鈥� expectations.
Spirit Airlines lost 11.4% after the discount carrier cut its forecast for revenue in the second quarter. It said it鈥檚 making fewer dollars than expected from fees outside of tickets.
In the bond market, the 10-year Treasury yield dipped to 4.15% from 4.16% late Tuesday.
In stock markets abroad, London's FTSE 100 rose 0.3% after the inflation rate remained steady at the Bank of England鈥檚 2% target in June. Indexes were mixed elsewhere across Europe and Asia.
___
AP Business Writer Elaine Kurtenbach contributed.
Stan Choe, The Associated Press
