Twelve Charts This Week - 7/19/2024

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The Nasdaq Composite index fell 2.9% on Wednesday and another 0.7% yesterday. The main causes were 1) continued rotation out of technology into small caps, value and cyclicals, 2) a news report that the Biden administration would impose more restrictions on semiconductor sales to China, 3) President Trump’s ambiguous comments about defending Taiwan, 4) the widening of high-yield credit spreads, and 5) RESULTS FROM ASML HOLDINGS. ASML cratered 12.7% Wednesday after it released its second quarter earnings (chart). It is still up 22% year-to-date and is up 154% since its October 2022 low. ASML is the technological leader in chip-making equipment, the machines that make semiconductors. Second quarter revenues and earnings exceeded expectations but guidance for the current quarter was lower. ASML expects revenues to show strong growth in 2025 after a flat ‘year of transition’ in 2024. We view the ASML stock decline as one more inflection after Salesforce, Dell and Micron, and as an indication that big tech stocks may start a longer correction. (see TCTW - 6/28/2024).

🚨 Could be impacted by this: ASML, other semiconductor stocks, tech sector, US policy towards China and Taiwan, China’s pressure on Taiwan.

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