Investors began September trading with a thud as stocks tumbled on Tuesday to start a historically tough month for markets, with AI darling Nvidia (NVDA) and chip names leading tech stocks down. The turn into the red comes amid a crucial week of data on the economy and labor market highlighted by an influential monthly jobs report.
The Dow Jones Industrial Average (^DJI) slid 1.5%, or over 600 points. The S&P 500 (^GSPC) dropped 2.1%, while the tech-heavy Nasdaq Composite (^IXIC) pulled back 3.3%.
Stocks are retreating from near highs as Wall Street hunkers down after a rollercoaster August, with the prospect of a potentially stormy September ahead. Investors are assessing the risk of data shocks or presidential race surprises in a month that’s typically terrible for traders.
Nvidia (NVDA) fell almost 10% Tuesday, as investors continue to withdraw following a lackluster earnings report and lingering questions about the future of the AI trade. Other chip stocks fell in tandem, with Broadcom (AVGO), Qualcomm (QCOM), and Taiwan Semiconductor Manufacturing Company (TSM) all down more than 6%.
Also top of mind is the August jobs report, due out on Friday, which could influence how deeply the Federal Reserve cuts interest rates at its meeting this month. With inflation now cooling, policymakers are on alert for the labor market to fall into place.
For investors, the focus is on whether the signs of slowing in the July jobs report were overstated — or an early warning of a broader slowdown. Any hints of stress should put pressure on the Fed to make a bigger reduction in rates. As of Tuesday, traders were pricing in 31% odds of a 50 basis point cut instead of 25 basis points, per the CME FedWatch Tool.
A measure of US manufacturing ticked up last month, according to fresh figures from the Institute for Supply Management (ISM). But the metric reflected slowed factory activity, with a reading below a threshold that suggests a contraction in the manufacturing sector.
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Dow loses 600 points in tough September start
Investors still reeling from the sell off in early August were greeted with a flashback of sorts as the first trading day of September pummeled stocks.
The Dow Jones Industrial Average (^DJI) slid 1.5%, or over 600 points. The S&P 500 (^GSPC) dropped 2.1%, while the tech-heavy Nasdaq Composite (^IXIC) pulled back 3.3%.
The Nasdaq on track to shed 3% in rocky September start
The major indexes were hit hard during the first September session, as the historically rough trading month lived up to its reputation on Tuesday.
As investors waited for a crucial week’s worth of economic data that will impact how aggressively the Federal Reserve will cut interest rates, stocks fell during the final hour of trading.
The S&P 500 (^GSPC) is experiencing its worst session since the sell-off in early August rekindled fears of an economic slowdown. Big tech names are driving much of the losses. The AI darling Nvidia is down more than 9%, along with other chip stocks. And tech-heavy Nasdaq Composite (^IXIC) shed 3%.
Nvidia stock tumbles to lowest level since mid-August
Nvidia (NVDA) stock sank more than 8% Tuesday as the overall market declined on the first trading day of the month.
The AI chip maker was the worst performer among the “Magnificent 7” stocks, falling to its lowest level since mid-August, Yahoo Finance’s Ines Ferré reports.
Technology (XLK) stocks led the declines as investors rotated into defensive sectors like Staples (XLP) and Utilities (XLU).
Tuesday’s decline comes less than a week after Nvidia posted quarterly results that beat consensus estimates but failed to send the stock price higher.
Up until last week, Nvidia had led the recent rebound in stocks, climbing nearly 25% in a span of three weeks following a global market sell-off.
Despite Tuesday’s losses, the stock is up more than 125% year-to-date.
Rite Aid emerges as a private company after bankruptcy
After completing a financial restricting following Chapter 11 bankruptcy, the drugstore chain Rite Aid will operate as a private company.
Through the bankruptcy the pharmacy shuttered hundreds of stores, sold off its benefit company and ironed out settlements with its lenders, Reuters reported Tuesday.
The new status of the company comes after Rite Aid filed for bankruptcy in 2023, reporting hundreds of millions of dollars in losses and as it faced a flood of opioid lawsuits related to allegations of ignoring warning signs of suspicions prescriptions.
The bankruptcy will leave the company with a much smaller footprint, down from its 2,000 pharmacies at the time of the filing.
All of the company’s common shares were cancelled, the company said, and ownership transferred to some Rite Aid creditors. The company appointed Chief Financial Officer Matt Schroeder as CEO, according to the report.
Moving forward, the company got rid of about $2 billion of total debt and took in roughly $2.5 billion financing.
Stocks trending in afternoon trading
Here are some of the stocks leading Yahoo Finance’s trending tickers page during afternoon trading on Tuesday:
Coinbase (COIN): The digital currency platform sank nearly 7% as a host of crypto-related firms followed much of the rest of the market into the red, as fears of an economic slowdown outweighed the prospects of the Fed’s expected rate cut later this month. The price of bitcoin, the main cryptocurrency sank further on Tuesday, around the $57,000 level, dragging the prospects of the digital currency ecosystem along with it.
Boeing (BA): Shares of the plane manufacturer sank 6% Tuesday morning following a price target cut from Wells Fargo, which highlighted pressure on the company’s cash flow as it works to develop new aircraft. The company also faces a major potential strike, as its workers in Washington state are set to go on strike if a deal isn’t reached later this month.
Nvidia (NVDA): Shares of the AI chip designer fell 7% during afternoon on Tuesday, continuing a slide that accelerated after the company’s earnings report last week that failed to impress Wall Street. The stock is down more than 12% over the last five days, highlighting a challenging moment for AI and chip companies that have stalled, as questions about returns on investments from their customers grow louder.
Broadcom (AVGO): Shares of the semiconductor company slid 5% as an array of chip stocks fell in tandem, alongside Nvidia. Qualcomm (QCOM) and Taiwan Semiconductor Manufacturing Company (TSM) were among the losers, shedding close to 6%.
Stocks fall to kick off bumpy September
US stocks fell on Tuesday to kick off a historically tough month for markets, as AI darling Nvidia (NVDA) and chip stocks led tech stocks down.
The Dow Jones Industrial Average (^DJI) slid 1%, or over 450 points. The S&P 500 (^GSPC) dropped 1.5%, while the tech-heavy Nasdaq Composite (^IXIC) pulled back nearly 2.5%.
Construction spending falls more than expected
While the August jobs report coming on Friday is the headline event for scheduled economic news this week, Tuesday offered a glimpse construction activity, with implications for the housing market.
The Commerce Department reported Tuesday that construction spending fell 0.3% in July, compared to no change in the prior month. Forecasts had the spending figures dipping by just 0.1%
The slightly larger than expected drop in spending reflects higher mortgage rates and greater supply.
Weaker demand has led builders to ease up on new construction projects. Single-family homebuilding dropped to a 16-month low in July.
However, mortgage rates continued to fall in August as expectations mount of a rate cut from the Federal Reserve during the upcoming September policy meeting. Rates are expected to slide even more as potential homebuyers wait out for better rates.
Affordability remains an issue, even as borrowing costs are likely to drop.
Fannie Mae’s Home Purchase Sentiment Index, measuring consumer sentiment about the residential housing market, fell in July. That highlights how the lack of affordability is dampening housing activity.
Why we’re not ready for the first presidential election of the AI era
With the election just a few short months away and generative AI detection technologies hit-or-miss, experts say we can expect to see more generative AI-based content designed to sow discord among the electorate, reports Yahoo Finance’s Dan Howley.
The 2024 elections are the first US presidential elections of the generative AI era, and we’re already seeing examples of the technology being used to impact how Americans cast their ballots.
On Aug. 18, former President Donald Trump shared a series of AI-generated images of Taylor Swift fans wearing pro-Trump shirts, despite the fact that the photos originally appeared in a post marked as satire on X (formerly Twitter). In January, deepfake phone calls went out to some New Hampshire residents, attempting to discourage them from participating in the state’s Democratic primary.
“The danger is that if there is a type of AI disinformation … like the Taylor Swift images … if millions of people are exposed to it and only 10% or 15% do not realize that that’s fake, that could be a substantial number for thinking about elections,” explained Augusta University political science professor Lance Hunter.
“[In] swing states, sometimes the margin of victory is less than 1%. So … a small number of people being exposed to this disinformation and not realizing it’s disinformation could be influential for election outcomes,” Hunter added.
Here are some of the stocks leading Yahoo Finance’s trending tickers page during morning trading on Tuesday:
Boeing (BA): Shares of the plane manufacturer sank 6% Tuesday morning following a price target cut from Wells Fargo, which highlighted pressure on the company’s cash flow as it works to develop new aircraft. The company also faces a major potential strike, as its workers in Washington state are set to go on strike if a deal isn’t reached later this month.
US Steel (X): The steel producer slipped nearly 4% after Democratic nominee Kamala Harris said the company should stay American-owned and run in the face of a proposed takeover by Japan’s Nippon Steel. Republican nominee Donald Trump has also opposed the proposed sale.
Nvidia (NVDA): Shares of the AI chip designer fell 5% during morning trading on Tuesday, continuing a slide that accelerated after the company’s earnings report last week that failed to impress Wall Street. The stock is down more than 10% over the last five days, highlighting a challenging moment for AI and chip companies that have stalled, as questions about returns on investments from their customers grow louder.
Unity (U): The video game software developer gained more than 7% Tuesday after analysts at Morgan Stanley upgraded its shares to Overweight from Equal Weight, pointing to the strength of its game engine business and Unity’s hold of its market share.
Stocks slide in morning trading
US stocks fell on Tuesday to kick off September, a historically tough month for markets as attention turned to a week of labor data highlighted by a crucial monthly jobs report.
The Dow Jones Industrial Average (^DJI) slid roughly 0.5% on the heels of a winning session booked before the Labor Day break. The S&P 500 (^GSPC) dropped 0.6% while the tech-heavy Nasdaq Composite (^IXIC) pulled back 0.8%.
Intel(NASDAQ: INTC) was once the world’s leading chipmaker. The company dominated the central processing unit (CPU) market and held lucrative partnerships with tech titans like Apple. However, a series of missteps and market changes have seen Intel’s stock tumble 46% in the last three years.
In recent years, the company has posted multiple quarters of revenue declines alongside dwindling market share in the chip sector. Intel has finally returned to revenue growth, posting gains in its fourth quarter of 2023 and the first quarter of 2024. Yet, investors remain wary of its stock. Rising competitors like Nvidia and Advanced Micro Devices threaten Intel’s future in budding markets like AI.
However, the company seeks to separate itself from these chipmakers by adopting an internal foundry model similar to how Taiwan Semiconductor Manufacturing Company operates. It’ll take time for Intel to see significant earnings growth from this transition, but it could be worth investing in the company at one of its lowest positions to profit from its potential comeback.
Here’s why Intel’s stock is a buy for investors willing to hold for the very long term.
A dismal quarterly release
On April 25, Intel released its Q1 2024 earnings. During the quarter, revenue rose 9% year over year to $13 billion yet missed analysts’ forecasts by about $80 million. Non-GAAP (adjusted) earnings per share (EPS) came to $0.18, beating expectations by $0.04.
However, growth and better-than-expected EPS weren’t enough to rally investors, with Intel’s stock dipping 14% since posting its Q1 earnings.
Intel disappointed with weak guidance for its current quarter (Q2 2024). For the second quarter, the company expects to achieve earnings of $0.10 per share on sales of $13 billion. Comparatively, Wall Street expected EPS of $0.25 and $13.6 billion in revenue.
Intel’s CEO Pat Gelsinger reiterated the company’s long-term potential, saying, “We are one of two, maybe three, companies in the world that can continue to enable next-generation chip technologies.” Taiwan Semi is the other obvious name on his list, followed by a “perhaps” for Samsung.
Q1 2024 was the first to include income from Intel Foundry, its new manufacturing division. The segment posted revenue of just over $4 billion, down 10% year over year. Meanwhile, operating losses came to $2.5 billion, compared to the $7 billion in losses reported in 2023.
However, Counterpoint analyst Akshara Bassi points out, “Running a foundry is a capital-intensive business. That’s why most of the competitors are fabless; they are more than happy to outsource it to TSMC.” Intel expects foundry losses to peak in 2024 and break even by the end of 2030.
Intel is moving in the right direction, but its stock will require patience
Intel’s transition to a foundry-first company will be costly. However, the company expects the change to help reduce costs and save between $8 billion and $10 billion by 2025. Meanwhile, increased efficiencies are projected to see Intel achieve non-GAAP gross margins of 60%.
Furthermore, Intel won’t be alone in covering the costs of its foundry business. The company is a leading recipient of President Biden’s CHIPS Act, an initiative to expand the United States’ semiconductor manufacturing capabilities. The program has earmarked $8.5 billion for Intel to build at least four facilities across the country.
Government funds have already begun to be dispersed, with the Biden administration announcing in April that Samsung would receive just over $6 billion to build out its chip manufacturing capacity. It’s still early days for the initiative, with experts projecting it to be 2027 or 2028 before U.S.-built chips make their way into mainstream consumer use. However, it’s a promising direction for Intel.
INTC PE Ratio (Forward) Chart
Perhaps the only positive development in Intel’s tumbling stock price is that its shares are potentially the best-valued option in the chip market. Nvidia and AMD’s recent rallies have seen their stock prices skyrocket over the last year.
The chart above shows Intel has the lowest forward price-to-earnings ratio and price-to-sales ratio out of these three chipmakers by a significant margin. These figures suggest Intel’s stock is trading at a bargain compared to AMD or Nvidia.
As a result, anyone looking to add a chip stock to their portfolio would probably do well to make a long-term investment in Intel now while they wait for Nvidia and AMD to come down to a more attractive price point.
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Dani Cook has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Apple, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Intel and recommends the following options: long January 2025 $45 calls on Intel and short May 2024 $47 calls on Intel. The Motley Fool has a disclosure policy.
