Nasdaq slides 1.2% in wake of chip crisis

Major US indices slid on Tuesday despite key markets ending mixed ahead of the CPI inflation report. Chipmaker Micron sent Nasdaq tumbling 1.20% after confirming falling demand right after Nvidia and AMD’s warnings for the same. S&P and DJIA fell 0.42% and 0.18%.

Key factors for today

● Micron drags tech and rest of US stocks down after startling warning
● CHIPS bill comes into law in a bid to compete with Chinese chipmakers
● WTI remains volatile but mainly down after API, rising demand concerns
● Non-Farm productivity at an all-time low
● Norway casts blow to EU’s power needs

US indices dragged down by Micron’s 5% drop

The Nasdaq led stock markets lower on Tuesday mostly due to chip stocks tumbling. Micron plummeted 7% after the firm lowered its revenue forecast, citing further demand deterioration. Advanced Micro Devices and Nvidia had already sent warnings to markets. Applied Materials, on Semiconductor, and Teradyne ended significantly lower too, dragging US indices down.

Adding to the pile, markets are worried about the lack of comments from Taiwan Semiconductor on potential supply disruption due to ongoing Chinese military drills. 

Biden signs CHIPS into law

Biden signed the CHIPS and Science Act into law on Tuesday in what is considered to be a landmark win for US chipmakers. The bill will provide $52.7bn of finances to US semiconductor companies in a bid to compete with China and reduce independence for technologies, let alone multiply the US market share. Micron announced a $40bn investment and 40,000 thousand jobs in an effort to receive funds.

Oil volatility sends commodity 1% lower

Crude prices closed the session 1% lower yesterday despite initially moving higher on reports that Russia had suspended shipments through the Druzhba pipeline into Hungary, Czechia, and Slovakia over transportation payment issues. General demand concerns contributed to a reversal later in the day along with oil stocks rising by 2.156mn, as per API’s report.

US Productivity at all-time low

The US reported its quarterly Non-Farm Productivity at -4.6% on Tuesday, just above the expectations of -5% and better than the prior quarter of -7.4%. However, the accumulated productivity for the last four quarters was the largest drop since records began. At the same time Unit Labor Costs exceeded expectations. US bond yields rose once again at the short end of the curve, deepening the inversion. US 3-MO ended 0.028 higher, but US 10-YR closed at 0.01.

Lack of rainfall continues to trouble Europe

Norway decided to not send hydropower to Europe in winter if rainfall levels are low in a blow to Europe ahead of what is considered to be a tough winter. The UK is reportedly planning for power cuts to industry and households in January in preparation for the worst-case scenario.

Market movers

● Coinbase 10% lower after missing on the bottom line despite better sales
● Micron 5% lower after cutting outlook due to supply chain factors
● Emerson Electric 3% lower after missing revenues and cutting outlook
● Ralph Lauren beat estimates, but it cut its outlook due to currency headwinds, and said it is expected to balance out inventory by the end of the year

On the docket

● Headline inflation expected to ease to 6.1%, but core to rise to 6.1%
● EIA crude and gas stocks could confirm API with an inventory build