Nasdaq Drops 0.63%, S&P 500 Slips 0.17% as Chip Stock Sell-Off Deepens; Dow Edges Higher on UnitedHealth Surge

Mumbai, July 16: US stock markets opened on a mixed note on Thursday, with the technology-heavy Nasdaq Composite and the benchmark S&P 500 extending their losses as semiconductor stocks faced renewed selling pressure. The Dow Jones Industrial Average, however, managed to hold onto gains, supported by a sharp rally in UnitedHealth Group following its earnings beat. 

As of 10:11 AM EDT, the Nasdaq Composite (^IXIC) was trading at 26,103.58, down 165.64 points or 0.63%, after opening at 26,155.40. The index remained under pressure throughout the morning session, with its day’s range touching a low of 25,968.44. The S&P 500 (^GSPC) slipped 12.56 points or 0.17% to 7,559.84, while the Dow Jones Industrial Average (^DJI) rose modestly, buoyed by strong corporate earnings. 

Chip Stock Rout Deepens as TSMC Earnings Fail to Impress 

The primary driver of the market weakness was a continued sell-off in semiconductor stocks, which have been the cornerstone of this year’s equity rally. The VanEck Semiconductor ETF (SMH) slid 2% in early trading, led by a 5% drop in Arm Holdings. The rout extended across the Atlantic, with STMicroelectronics — Europe’s largest semiconductor manufacturer — shedding 3%, while ASMI dropped 2.9% and Infineon Technologies fell 2.8%. 

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The trigger for Thursday’s decline was Taiwan Semiconductor Manufacturing Company’s (TSM) quarterly results. Despite reporting a 77% surge in second-quarter profit and record revenue of $40.2 billion, the world’s largest contract chipmaker saw its US-listed shares fall 1.5% in early trading. Investors focused on the company’s gross margin guidance, which came in at a midpoint of 66% for the third quarter, 1.7 percentage points below the second quarter’s 67.7%. The company also raised its full-year capital expenditure forecast to between $60 billion and $64 billion, up from a prior guidance of $52 billion to $56 billion, and announced an additional $100 billion investment in Arizona. CEO C.C. Wei stated that “our conviction in the multi-year AI megatrend remains very high,” but the market’s reaction suggested that preserving margins has become a more critical test than demonstrating demand. 

Memory Chip Stocks Extend Losses Amid Broader Sector Weakness 

The selling pressure was particularly acute in the memory chip segment. US-listed shares of South Korean firm SK Hynix dropped 6% after plunging 9% in the previous session. The Roundhill Memory ETF (DRAM) declined 4.5%, with components including Micron Technology (MU), Sandisk (SNDK), and Seagate Technology Holdings (STX) recording losses between 2.5% and 5%. 

Among the Nasdaq 100 components, the decline was widespread. Intel Corporation (INTC) fell 2.21%, Advanced Micro Devices (AMD) dropped 3.57%, and Broadcom (AVGO) declined 4.02%. Nvidia (NVDA), the poster child of the AI boom, shed 1.97%, reflecting the broader sectoral weakness. Qualcomm (QCOM) fell 3.13%, while Texas Instruments (TXN) declined 2.75%. 

UnitedHealth Surges 8% on Earnings Beat, Lifts Dow 

Providing a counterbalance to the tech-driven weakness, UnitedHealth Group (UNH) shares jumped 8% in early trading, reaching their highest level since April 2025. The health insurance giant reported adjusted earnings of $6.38 per share on revenue of $112.03 billion for the second quarter, comfortably exceeding analyst expectations of $4.87 per share on revenue of $110.85 billion. The company also raised its full-year adjusted earnings outlook to between $19.50 and $20.00 per share, up from a prior forecast of at least $17.75. CEO Stephen Hemsley said the results reflected “continuing progress” in simplifying operations. 

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GE Aerospace (GE) also reported quarterly results before the opening bell, posting adjusted earnings of $2.02 per share on revenue of $12.63 billion, beating analyst estimates of $1.86 per share on revenue of $11.86 billion. The company raised its full-year guidance. However, GE Aerospace shares fell 3.48% in early trading, as investors appeared to have priced in the positive results. 

Economic Data Shows Resilient Consumer Spending and Labour Market 

On the macroeconomic front, data released Thursday morning painted a picture of a resilient US economy. Retail and food services sales rose 0.2% in June to an advance estimate of $768.6 billion, matching economists’ expectations. Core retail sales, which exclude automobiles and gasoline, advanced by a stronger 0.4%. While the headline figure marked a slowdown from May’s revised 1% growth, the data suggested that consumers continued to spend despite elevated gasoline prices. 

Initial unemployment claims for the week ending July 11 fell by 8,000 to 208,000, below the Dow Jones consensus estimate of 218,000. Continuing claims, which run a week behind, dropped by 16,000 to just over 1.8 million. The four-week moving average of initial claims fell to 214,250 from 219,000 the prior week. 

The Philadelphia Federal Reserve’s manufacturing index soared to 41.4 for July, up some 31 points from the prior reading and well above the 9.8 forecast. This marked the highest level since November 2021, indicating robust factory activity in the region. 

Treasury Yields and Oil Prices Rise Amid Middle East Tensions 

US Treasury yields edged higher on Thursday, with the 10-year yield climbing 4 basis points to 4.59% and the 30-year yield rising to 5.13%. The yield on the 2-year Treasury note, which more closely tracks short-term Federal Reserve interest rate policy, rose over 2 basis points to 4.1577%. 

Crude oil prices extended their gains for a fourth consecutive session as geopolitical tensions in the Middle East intensified. Brent crude futures rose 0.5% to $85.95 a barrel, while West Texas Intermediate (WTI) crude gained 0.9% to $80.35 a barrel. The latest escalation came after the United States launched fresh strikes on Iranian missile storage facilities and launch sites near the strategic Strait of Hormuz. Reports indicated that Iranian leaders had told the Houthi militia to prepare to close the Red Sea’s Bab el-Mandeb Strait if the US strikes Iranian power infrastructure. The Strait of Hormuz has remained at the centre of geopolitical tensions since the outbreak of the conflict in late February, with temporary disruptions to shipping through the vital waterway fuelling concerns over global energy supplies. 

Top Gainers and Losers in Early Trading 

Among the top gainers in early trading, AtaiBeckley Inc. (ATAI) soared 32% to $7.08 after Eli Lilly announced a $2.8 billion acquisition of the psychedelic drugmaker. ManpowerGroup Inc. (MAN) jumped 27.18% to $49.63, while Abbott Laboratories (ABT) rose 12.23% to $100.19 following strong quarterly results. UnitedHealth Group (UNH) rounded out the top gainers with an 8% advance. 

On the losing side, ChronoScale Holdings Corporation (CHRN) tumbled 20.38% to $23.59, while AST SpaceMobile, Inc. (ASTS) fell 13.67% to $57.24. United Microelectronics Corporation (UMC) dropped 8.73% to $22.75, and BlackBerry Limited (BB) declined 10.01% to $9.57. Corning Incorporated (GLW) fell 7.36% to $161.57, extending its losses from the previous session. 

Magnificent Seven Stocks Trade Mixed 

The Magnificent Seven mega-cap technology stocks traded mixed in early trading. Apple (AAPL) rose 0.33%, continuing its recent streak of record highs. The iPhone maker’s stock has been on a roll, climbing 4% on Wednesday to close above $327 , after reports that the company is on the hunt to acquire an AI chip company to help realize its AI ambitions. 

Alphabet (GOOGL) shares fell 0.07%, while Meta Platforms (META) declined 1.59%. Microsoft (MSFT) slipped 0.72%, and Tesla (TSLA) led the declines among the group, falling 2.05%. Amazon (AMZN) edged lower by 0.43%. 

Market Rotation: $3.2 Trillion Shift from Chips to Software 

Beneath the surface, a significant rotation has been underway. The Magnificent Seven have added approximately $1.5 trillion in market value in July, while semiconductor stocks excluding Nvidia have erased nearly $1.8 trillion. These giant moves have largely cancelled each other out at the index level, explaining why the S&P 500 has spent more than two months bouncing between support and resistance. 

The rotation is broader than a handful of megacaps. Forty-four of 51 software stocks in the Yahoo Finance industry basket are positive in July, with a median gain of roughly 6%. In contrast, only a handful of 62 semiconductor stocks are higher, including Nvidia and Broadcom, with the median chip stock down nearly 20%. 

South Korea Halts New Leveraged ETF Listings Amid Market Volatility 

South Korean regulators announced they are reversing course after approving single-stock leveraged ETFs tied to Samsung Electronics and SK Hynix in May, following criticism that the products have contributed to market volatility. The reforms include prohibiting new listings of similar products and raising minimum cash deposit requirements.  

The benchmark Kospi index plunged 6.4% on Thursday, slipping into a bear market after the Bank of Korea raised interest rates for the first time since January 2023. The Kospi has posted gains or losses of more than 5% in 27 trading sessions so far this year, reflecting the heightened volatility in Asian markets.  

The decision by South Korean regulators highlights growing concerns globally about the impact of leveraged products on market stability, particularly in the volatile semiconductor sector. 

Nvidia Unveils Cosmos 3 Edge AI Model for Physical AI Market 

Nvidia (NVDA) unveiled a new AI model for robots and vision AI agents on Wednesday, deepening its push into the physical AI market in Japan. The company’s new model, Cosmos 3 Edge, is a so-called world model designed to help systems perceive and navigate physical environments in real time.  

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World models are systems that can learn from a wider range of inputs compared to large language models (LLMs). The announcement came as Nvidia continues to expand its AI ecosystem beyond traditional data centre applications into robotics, autonomous vehicles, and industrial automation. The company’s shares, however, fell 1.97% in early trading amid the broader semiconductor weakness, as investors weighed the long-term potential of the new model against the current market’s focus on valuations and margin pressures. 

Eli Lilly Acquires Psychedelics Maker AtaiBeckley for $2.8 Billion 

Eli Lilly announced on Thursday that it will acquire psychedelic drugmaker AtaiBeckley for $2.8 billion up front, confirming earlier reports. The transaction gives Lilly access to AtaiBeckley’s experimental DMT-based drug that is being studied in Phase 3 clinical trials for treatment-resistant depression. AtaiBeckley is developing several other psychedelics for mental health conditions, including one related to MDMA, also known as ecstasy.  

The acquisition would bolster Eli Lilly’s neuroscience business, one of the industry’s most difficult areas to develop drugs for, which is a key area of growth alongside obesity and diabetes. The deal underscores the pharmaceutical industry’s growing interest in psychedelic-inspired treatments for severe mental illnesses, particularly depression, with treatments that act faster than existing options. The acquisition news sent AtaiBeckley shares soaring 32% in early trading. 

Federal Reserve Beige Book Highlights Economic Resilience Amid Iran Conflict Risks 

The Federal Reserve’s ‘Beige Book’ report, released on Wednesday, painted a picture of a US economy that is improving on several fronts but hanging in the balance amid new risks stemming from the Iran war. The report, composed of anecdotal information from Fed districts across the country, showed the economy expanding from late May through early July. It also reported an improving job market and inflation that has lost some steam, while consumers remained under financial stress, though not as much as in recent months.  

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The report contained half as many mentions of “gasoline” and “fuel” prices as the previous report, reflecting a price downturn during the month that helped quell overall inflation. However, the report covered a period around when a short-lived ceasefire in Iran took hold. Since then, the latest wave of fighting has sent gasoline prices shooting up once again, muddying the economic outlook. The Beige Book added to recent evidence that the threat of inflation was dormant in June, though not conquered, with rising energy prices posing a renewed threat to the Fed’s inflation-fighting efforts. 

Netflix Earnings in Focus After Market Close 

Investors are now looking ahead to Netflix’s (NFLX) second-quarter results, scheduled for release after the market closes. The streaming giant’s report will provide further insight into the health of the technology sector and consumer discretionary spending. The company’s shares edged lower in early trading ahead of the announcement. 

The divergence between the Dow’s resilience and the Nasdaq’s decline highlights the market’s selective approach to earnings and valuations. UnitedHealth’s surge demonstrates that strong fundamentals continue to attract buying interest, while the chip sector’s pullback reflects heightened scrutiny on margins and capital expenditure discipline.  

The mixed economic data, showing resilient consumer spending alongside a robust labour market, suggests the Federal Reserve’s policy stance remains data-dependent. With geopolitical tensions in the Middle East adding another layer of uncertainty, market participants are closely monitoring oil prices and their potential impact on inflation expectations. The upcoming earnings from Netflix will provide the next test for technology valuations.