U.S. stocks drifted lower at midday Monday as a violent melt-up in AI optical and memory names collided with a bond market that refuses to settle down, leaving the S&P 500 a whisker below Friday’s close after last week’s record.
Across U.S. equity markets by midday Monday, losses were shallow but broad, with only three of eleven S&P 500 sectors holding gains.
The S&P 500 eased 0.2% to 7,772.93. The Dow Jones Industrial Average fell 172 points, or 0.3%, to 53,560.
The Nasdaq 100 was effectively flat at 30,033, propped up by chips and memory names. Russell 2000 fell 0.3% to 3,059.
Shares of SanDisk Corp. SanDisk Corp. (SNDK) rallied by 10%, extending a powerful 35% rally from the previous week. Micron Technology Inc. Micron Technology Inc. (MU) also jumped 6%, amid a bullish note from Bank of America.
Commerce Secretary Howard Lutnick said the administration is “not in favor” of Apple sourcing DRAM and NAND from Chinese suppliers ChangXin Memory Technologies and Yangtze Memory Technologies, fueling a broad-based rally across the sector.
The Roundhill Memory ETF Roundhill Memory ETF (DRAM) was up 7% in the session.
The real action was in the long end of the curve. The 10-year Treasury yield pushed back above 4.71%, now trading within four basis points of the 19-month high of 4.75% tested last week.
The 30-year climbed 3 basis points to 5.29%, a fresh 19-year peak.
Rate-hike odds, by contrast, kept fading.
Fed Chair Kevin Warsh‘s suggestion that a hike may not be his preferred tool against higher prices has taken the sting out of front-end pricing, and the dollar softened accordingly ahead of Wednesday’s FOMC minutes from a meeting that produced three dissents.
The data ran hot. The New York Fed’s Empire State Manufacturing Index jumped to 20.6 in August from 15.6, blowing past the 11 consensus and marking the fastest expansion since late 2021.
Fading rate-hike bets lit up precious metals. Gold rose 1.2% to $4,427 an ounce and silver jumped 2.6% to $66.37, lifting the SPDR Gold Shares SPDR Gold Shares (GLD).
Monday’s Performance In Major US Indices
According to the market data platform:
- The Vanguard S&P 500 ETF Vanguard S&P 500 ETF (VOO) slipped 0.2%.
- The SPDR Dow Jones Industrial Average ETF Trust SPDR Dow Jones Industrial Average ETF Trust (DIA) fell 0.3%.
- The Invesco QQQ Trust Invesco QQQ Trust (QQQ) was flat at 0.0%.
- The iShares Russell 2000 ETF iShares Russell 2000 ETF (IWM) declined 0.3%.
AI Optics Melt Up While Staples Get Dumped
The Technology Select Sector SPDR Fund Technology Select Sector SPDR Fund (XLK) led with a 0.6% gain, matched by the Energy Select Sector SPDR Fund Energy Select Sector SPDR Fund (XLE). At the other end, the Communication Services Select Sector SPDR Fund Communication Services Select Sector SPDR Fund (XLC) sank 1.6% and the Consumer Staples Select Sector SPDR Fund Consumer Staples Select Sector SPDR Fund (XLP) dropped 1.5%.
The Real Estate Select Sector SPDR Fund Real Estate Select Sector SPDR Fund (XLRE) and the Consumer Discretionary Select Sector SPDR Fund Consumer Discretionary Select Sector SPDR Fund (XLY) each fell about 1.0% as long yields bit, while the Industrials Select Sector SPDR Fund Industrials Select Sector SPDR Fund (XLI) and the Health Care Select Sector SPDR Fund Health Care Select Sector SPDR Fund (XLV) clung to small gains.
Industry ETFs told the rotation story more bluntly.
The VanEck Gold Miners ETF VanEck Gold Miners ETF (GDX) surged 2.7%, extending a 24.7% month-to-date run, while the VanEck Semiconductor ETF VanEck Semiconductor ETF (SMH) added 1.8% and the iShares Biotechnology ETF iShares Biotechnology ETF (IBB) rose 1.8%.
On the losing side, the iShares Expanded Tech-Software Sector ETF iShares Expanded Tech-Software Sector ETF (IGV) fell 1.6%, with the Invesco Solar ETF Invesco Solar ETF (TAN) down 1.3% and the SPDR S&P Retail ETF SPDR S&P Retail ETF (XRT) off 1.3%.
The session’s dominant trade was AI optical interconnect and memory.
Fresh reporting that AI lab Anthropic booked $11.5 billion in second-quarter revenue and is meeting with banks about what could be the largest IPO on record reinforced the view that datacenter capital expenditure has years to run.
Coherent Corp. Coherent Corp. (COHR) jumped 10.4% to $359.63, still riding its Aug. 12 fiscal fourth-quarter beat on both revenue and EPS, plus above-consensus guidance.
Jefferies, Morgan Stanley and Rosenblatt have all raised price targets since the print, one as high as $500, and Needham initiated coverage with a Buy. A reported FCC proposal to ban Chinese optical transceiver imports positions Coherent as a domestic beneficiary.
Semtech Corp. Semtech Corp. (SMTC) rose 10.6% to $155.17, extending a run that began when Needham reiterated its Buy rating and $200 price target after investor meetings with management, citing better-than-expected 800G and 1.6T optical module shipments, adoption of its CopperEdge ACC cables by a major cloud customer and growing LoRa+ demand.
Credo Technology Group Holding Ltd. Credo Technology Group Holding Ltd. (CRDO) advanced 8.2% to $281.31, trading purely on read-through from the same AI connectivity demand narrative.
The theme extended well beyond the leaderboard. Lumentum Holdings Inc. Lumentum Holdings Inc. (LITE) rose 7.1% after a fiscal fourth quarter in which revenue more than doubled to $1.01 billion and CEO Michael Hurlston said pump-laser shipments were up 80% year over year and effectively sold out.
Marvell Technology Inc. Marvell Technology Inc. (MRVL) gained 7.0%, and Ciena Corp. Ciena Corp. (CIEN) added 6.5%, both on Lumentum read-through, with Marvell not due to report until Aug. 28. Corning Inc. Corning Inc. (GLW) rose 6.4%.
The damage was concentrated in restaurants, beverages, cable and mortgage finance.
Wingstop Inc. Wingstop Inc. (WING) was the worst performer in the Russell 1000, sliding 8.4% to $115.58. The chain is now down 62% over 12 months and trading at a four-year low after a fifth consecutive quarter of same-store sales declines, with second-quarter comps off 7.5%.
UWM Holdings Corp. UWM Holdings Corp. (UWMC) dropped 6.0%, extending the derating that followed its Aug. 5 announcement of a $2.05 billion capital partnership with the Ishbia family and Oaktree Capital Management, as well as the suspension of its common dividend to prioritize debt reduction.
Constellation Brands Inc. Constellation Brands Inc. (STZ) fell 5.9% to $130.93 after Freedom Broker cut the stock to Hold from Buy and slashed its price target to $173 from $223, citing softer beer depletion trends and limited near-term visibility.
Molson Coors Beverage Co. Molson Coors Beverage Co. (TAP) fell 4.5% in sympathy, extending the de-rating that followed its Aug. 6 second quarter, when sales fell 3.3% year over year to $3.10 billion.
Charter Communications Inc. Charter Communications Inc. (CHTR) dropped 5.6% to $145.65; the stock remains under pressure from second-quarter broadband subscriber losses, its recent bond exchange and uncertainty over merger timing.
