Chip Sector Tumbles Alongside Broader Market Selloff as Economic Data Sends Mixed Signals

Major Indices Face Selling Pressure

U.S. stock markets are retreating across the board on this final trading day of the year. The S&P 500 is trading -0.33% lower, while the Dow Jones Industrial Average slips -0.35%. The Nasdaq 100 is pressured -0.34%, with futures markets pointing to additional weakness ahead: March E-mini S&P 500 futures are off -0.35% and March E-mini Nasdaq futures down -0.38%. All three major indices are approaching their lowest levels in the past 1-1.5 weeks, signaling growing investor caution as 2025 draws to a close.

Semiconductor and Storage Stocks Lead the Decline

The tech sector is bearing the brunt of today’s losses, with semiconductor and data storage companies driving the broader market selloff. Among chip manufacturers, Micron Technology is experiencing the steepest losses, sliding more than -1% to lead Nasdaq 100 decliners. Other semiconductor heavyweights are also under pressure: Qualcomm, Broadcom, Marvell Technology, and KLA Corp are all down more than -1%. Western Digital, a key player in data storage solutions, is similarly pressured, reflecting softness across the entire semiconductor supply chain. This coordinated weakness in the chip complex suggests sector-wide headwinds rather than isolated company struggles.

Commodity and Mining Weakness Compounds Market Losses

Beyond technology, precious metal weakness is adding to market pressure. Gold prices have fallen to their lowest point in 2.5 weeks, while silver prices are plunging more than -7%—a sharp decline that’s pulling mining stocks lower. Newmont and Barrick Mining are both trading down more than -1%, with Freeport-McMoRan off -0.69% and Hecla Mining declining -0.46%.

Labor Market Strength Weighs on Treasury Markets

Today’s market weakness gained fresh fuel from better-than-expected labor market data. U.S. weekly initial unemployment claims fell 16,000 to hit a 1-month low of 199,000, surprising consensus expectations that had predicted claims would rise to 218,000. While this signals underlying employment resilience, it’s sparking concern about sticky inflation and potentially higher interest rates. The 10-year Treasury yield climbed 2 basis points to 4.14% following the data, with March 10-year T-notes down -4 ticks. This higher rate environment pressures growth-sensitive equities, particularly in technology and rate-sensitive sectors.

Contrasting Global Economic Signals

China’s economic data, however, painted a rosier picture ahead of the New Year. The December manufacturing PMI unexpectedly rose 0.9 points to 50.1, marking the fastest pace of expansion in 9 months and outpacing expectations for no change at 49.2. The non-manufacturing PMI similarly surprised to the upside, climbing 0.7 points to 50.2 versus forecasts of 49.6. These stronger-than-expected readings suggest China’s economy may be stabilizing after recent weakness, providing some support for global growth narratives.

Individual Stock Moves and Surprise Winners

On the positive side, Nvidia is up +0.43% as a leader within the Nasdaq 100 after Reuters reported the company has approached TSMC to increase production of its H200 artificial intelligence chips in response to stronger demand signals from China. Nike surged more than +2% to lead Dow gainers following an SEC filing revealing CEO Hill purchased approximately $1 million worth of shares on Monday, signaling insider confidence at current levels.

In the pharmaceutical space, Vanda Pharmaceuticals jumped more than +31% after FDA approval of its Nereus drug for motion-induced vomiting prevention. Conversely, Corcept Therapeutics plummeted more than -51% after the FDA rejected its relacorliant treatment for hypertension tied to hypercortisolism, citing insufficient effectiveness evidence. Terawulf Inc rallied more than +5% following an Keefe, Bruyette & Woods upgrade to outperform with a $24 price target.

Market Conditions and Rate Expectations

Trading volumes remain suppressed today with international markets closed for New Year holidays—Germany and Japan are not trading, reducing overall market participation. The market continues to price in only a 15% probability of a 25 basis point rate cut from the Federal Reserve at its January 27-28 meeting, reflecting current expectations for steady policy.

Seasonal patterns historically favor equities during late December, with data from Citadel Securities showing the S&P 500 has risen 75% of the time during the final two weeks of December since 1928, averaging 1.3% gains. This week’s focus will turn to U.S. economic data, with the December S&P manufacturing PMI expected to remain at 51.8 on Friday.