Semiconductor ETF plunges 4% as energy, financials lead rotation

The S&P 500 edged up 0.13% to a three-week high as a 4.16% plunge in the semiconductor ETF was offset by a 3.03% energy rally driven by escalating US-Iran hostilities over the Strait of Hormuz.

Q2 earnings are forecast to increase 23%, close to the first quarter's 30% growth, according to Bloomberg Intelligence. AI infrastructure stocks are expected to contribute nearly 60% of the S&P 500's earnings-per-share growth in the period.

The semiconductor selloff was led by Intel, AMD and Applied Materials, each down 4%, after SK Hynix's second-quarter profit estimate landed 8% below consensus, triggering a 15% plunge in the South Korean memory maker and a brief KOSPI trading halt. Lam Research dropped 5% and the iShares Semiconductor ETF fell 4.16%. The weakness spread across the chip complex, with Marvell Technology falling 4%, ARM Holdings and Qualcomm each down 2%, and Micron Technology, KLA Corp and ASML Holding each declining more than 1%.

On the upside, the Energy Select Sector ETF gained 3.03% as WTI crude rose 3.64% to $74.01 a barrel and Brent jumped 5.3% to $79.22 after Iran declared the Strait of Hormuz closed. The US struck Iranian military sites for the fourth time in a week, with Central Command saying weekend strikes hit around 140 targets. The Financial Select Sector ETF added 0.65%, supported by higher rate expectations as the market priced a 26% chance of a Fed hike at the July 28-29 meeting.

The divergence marks the sharpest sector rotation in weeks. Intel's second-quarter earnings, due this month, could reset the debate between memory-cycle risk and AI compute demand, with Polymarket pricing a 67% probability of a beat.

Oil Spike Reshapes Rate Expectations

The tech-heavy Nasdaq 100 rose just 0.08%, held back by the semiconductor drag, while the Dow Jones Industrial Average gained 0.20%. The 10-year Treasury yield rose 1 basis point to 4.561% as crude's surge pushed inflation expectations higher, while the US dollar firmed against major peers. The Cboe Volatility Index remained elevated as the selloff in chip stocks offset gains in defensive and cyclical sectors.

Meta Platforms jumped 6% to lead the S&P 500 after research firm SemiAnalysis published a positive report on the company's AI computing business. Cybersecurity stocks were among the hardest hit, with CrowdStrike falling 5%, Zscaler and Okta each down 4%, and Palo Alto Networks, Cloudflare and Fortinet each declining 3%.

The selloff in chip stocks extended to Asia, where the S&P/ASX 200 Tech Index fell 2% and the KOSPI slid 9% before recovering. SK Hynix's American depositary receipts closed 13% above their offering price on their Nasdaq debut, the largest ever first-time share sale by a foreign company, with the $26.5 billion offering more than seven times oversubscribed. The KOSPI's slide triggered a brief trading halt, highlighting the outsized influence of memory stocks on South Korea's benchmark index.

This article is for informational purposes only and does not constitute investment advice.