The Dow Jones Industrial Average and S&P 500 both trended 0.2% lower during Wednesday’s session due to news that, at this point, should hardly be considered news at all: trade tensions. After President Trump said Tuesday he plans to halt trade talks with China unless the country agrees to previous terms negotiated earlier in the year, negative sentiment surrounding the talks doubled down on Wednesday when Reuters released a report in which several trade officials indicated that expectations are low for the upcoming talks between Trump and Chinese President Xi Jinping at the upcoming G20 summit. The report quoted one senior Western diplomat based in Beijing, who bluntly said the “atmosphere is poisonous” regarding U.S.-China relations.
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But the worst of the three major indexes was the tech-heavy Nasdaq, which fell 0.4% for its worst daily drop in a week. That was largely thanks to Facebook Inc.’s (FB) 1.7% selloff during trading hours and another 1.4% drop after the closing bell following leaks of emails from 2012 indicating that CEO Mark Zuckerberg knew of potential privacy concerns leading up to the Cambridge Analytica scandal. The emails were unearthed in response to the Federal Trade Commission’s (FTC) ongoing investigation of the scandal, and they mostly revealed internal Facebook practices that violated a 2012 agency decree demanding the company take measures to better protect user privacy.
That wasn’t even the biggest piece of news to drag tech-related stocks down. As this list shows, semiconductors were among the S&P 500’s worst performers, rounding out four of the top five companies…
No. 5: Halliburton Co. (HAL)
Halliburton – one of the world’s largest oilfield services firms – was the index’s worst-performing energy stock during Wednesday’s session, falling 4.57% from $22.08 to $21.07. That’s near the lowest levels of the decade, with shares last touching just above the $21 level in June 2010 when they traded near an average price of $21.15. HAL stock is now down 20.7% year-to-date from the Dec. 31 close of $26.58.
While no company-specific news seemed responsible, Halliburton’s selloff was likely due to the continued decline in crude oil prices that’s rocked the entire energy sector lately. WTI prices have technically been in a bear market since last week and on Wednesday dropped toward $51 a barrel, the worst level since Jan. 14 when the front-end futures contract settled at $50.51. That decline also hit other energy stocks like Noble Energy Inc. (NBL) and Baker Hughes (BHGE), which tumbled 4.4% and 3.7% on the day.
No. 4: Applied Materials Inc. (AMAT)
The stalwart semiconductor company saw its shares fall 5.1% from $43.75 on Tuesday to $41.50 by Wednesday’s closing bell for the lowest settlement in nearly a week. Despite that drop, AMAT remains a strong performer in 2019, with shares up 26.8% from $32.74 on Dec. 31.
Applied Materials suffered along with the rest of the semiconductor sector after analysts from investment bank Evercore Inc. (EVR) said they don’t see the industry recovering until at least the second half of 2020. Their primary reason is excess inventories of the two most popular semiconductor memory types DRAM and NAND, the latter of which is used for computers and tablets while the former is used for cellphones and jump drives.
Even worse was how the analysts specifically identified several companies they believe will experience significant downside risk in the near and long terms. They maintain AMAT’s “Outperform” rating but also slashed the price target by 9.1% from $55 to $50.
The same happened for Wednesday’s third-biggest, second-biggest, and first-biggest S&P losers: Lam Research Corp. (LRCX), Micron Technology Inc. (MU), and Western Digital Corp. (WDC), respectively.
No. 3: Lam Research Corp. (LRCX)
Shares of LRCX dropped 5.3% from $189.92 to a more than one-week low of $179.88 after the Evercore team downgraded the stock from “Outperform” to “In-line” and reduced the price target by 13.3% from $225 to $195.
Analyst C.J. Muse began the note optimistically, saying, “At a bigger picture level, there is no change to our view on Lam – a high quality company with superior earnings power through cycles.” But he steered in a different direction when he said, “the severity of the current memory correction combined with timing of a recovery leads us to see a better buying opportunity ahead.”
No. 2: Micron Technology Inc. (MU)
Micron declined 5.4% on the day, going from $34.84 to $32.96 once the analysts said they see shares falling to the high $20 range, which would be at least 12% below the current level.
Evercore explained the rationale behind its second MU downgrade in less than a month: “While we reduced our estimates 2 weeks ago for [Micron], worse trends since then causes one more cut— we are better buyers in high $20′s.”
No. 1: Western Digital Corp. (WDC)
Finally, the S&P’s worst-performing semiconductor stock and worst performer overall was Western Digital, whose shares plunged 5.65% from $38.41 to $36.24. Evercore maintained its “Underperform” rating but slashed the price target to $30, down more than 17% from the current level.
The analysts noted: For [Western Digital], we maintain Underperform rating and $30 PT. We see ongoing excess inventories weighing on NAND pricing through CY19.”
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