Stock Market Today: Semis Get Slammed and Blue Chips Bounce

Stocks closed mixed as blue chips hit another record high but tech names tumbled on the potential for tighter U.S. restrictions on chip sales to China.  

The U.S. presidential campaign season is already sending shockwaves through capital markets, notes José Torres, senior economist at Interactive Brokers. 

“Semiconductor shares are getting hammered on news that Trump isn’t happy with the technology sector’s warmth toward Beijing,” Torres writes in a note to clients. “Meanwhile, President Biden is rushing to potentially implement the harshest of penalties to chip firms that trade with China to toughen up on the geopolitical front and possibly shore up his dwindling odds of reelection.” 

Concerns about additional curbs on sales of chips to China sent semiconductor stocks reeling. Magnificent 7 stock Nvidia (NVDA) dropped 6.6%, with Broadcom (AVGO, -7.9%), Advanced Micro Devices (AMD, -10.2%), Micron Technologies (MU, -6.3%) and several other sector names moving in sympathy. 

As a result, the tech-heavy Nasdaq Composite tumbled 2.8% to settle at 17,996, while the broader S&P 500 fell 1.4% to 5,588. The blue-chip Dow Jones Industrial Average, however, set its 22nd record close or the year with a 0.6% gain to 41,198.

Today’s divergent market action is raising questions about the sustainability of the current bull market. As Interactive Brokers’ Torres notes, much of 2024’s equity gains have come from “a handful of names currently under direct threat” from political campaigning. 

“An important question is if the rest of the market, which generally lacks thrilling tales on a relative basis, can offset the waning momentum in the Magnificent 7 stocks,” the economist says. 

J&J helps the Dow

Johnson & Johnson (JNJ, +3.7) was a leading gainer among all 30 Dow Jones stocks after posting better-than-expected earnings. The pharmaceutical giant reported earnings per share (EPS) of $2.82 for the second quarter vs analysts’ average estimate of $2.71. Revenue topped $22.3 billion, which was essentially in line with estimates. 

Although Johnson & Johnson has long been one of the best dividend stocks for dependable dividend growth, its returns have been less than stellar. Indeed, JNJ trails the broader market for the year to date and has generated negative annualized total returns for the past one- and three-year periods.

Acquisitions, spin-offs and other moving parts make it tough for analysts to update their models. That’s partly why the Street is sort of split on the JNJ at current levels.

Of the 23 analysts covering JNJ surveyed by S&P Global Market Intelligence, seven rate it at Strong Buy, five say Buy and 11 have it at Hold. That works out to a consensus recommendation of Buy, albeit with tepid conviction at best.

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Dan Burrows is Kiplinger’s senior investing writer, having joined the august publication full time in 2016.

A long-time financial journalist, Dan is a veteran of SmartMoney, MarketWatch, CBS MoneyWatch, InvestorPlace and DailyFinance. He has written for The Wall Street Journal, Bloomberg, Consumer Reports, Senior Executive and Boston magazine, and his stories have appeared in the New York Daily News, the San Jose Mercury News and Investor’s Business Daily, among other publications. As a senior writer at AOL’s DailyFinance, Dan reported market news from the floor of the New York Stock Exchange and hosted a weekly video segment on equities.

Once upon a time – before his days as a financial reporter and assistant financial editor at legendary fashion trade paper Women’s Wear Daily – Dan worked for Spy magazine, scribbled away at Time Inc. and contributed to Maxim magazine back when lad mags were a thing. He’s also written for Esquire magazine’s Dubious Achievements Awards.

In his current role at Kiplinger, Dan writes about equities, fixed income, currencies, commodities, funds, macroeconomics, demographics, real estate, cost of living indexes and more.

Dan holds a bachelor’s degree from Oberlin College and a master’s degree from Columbia University.

Disclosure: Dan does not trade stocks or other securities. Rather, he dollar-cost averages into cheap funds and index funds and holds them forever in tax-advantaged accounts.