[New York Stock Market] Mixed Close...Tech Stocks Plunge on 17% AMD Shock

The three major stock indexes on the New York Stock Exchange ended mixed. Selling in technology stocks, including semiconductor shares, intensified, while blue chips showed strength.

On the New York Stock Exchange that day, the Dow Jones Industrial Average, which is centered on blue chips, closed at 49,501.3, up 260.31 points (0.53%) from the previous trading day. The S&P 500 Index, which is centered on large-cap stocks, ended the session at 6,882.72, down 35.09 points (0.51%). The tech-heavy Nasdaq Composite closed at 22,904.579, down 350.606 points (1.51%).

Agence France-Presse and Yonhap News Agency

Shares of AMD, which reported earnings that day, fell 17.31%, the steepest decline since 2017, as its first-quarter outlook failed to meet market expectations.

The shock triggered by AMD spread across the semiconductor industry as a whole, sending leading artificial intelligence (AI) stock Nvidia down 3.41% and Broadcom down 3.83%. Memory manufacturer SanDisk plunged 15.95%. Palantir fell 11.62%.

Software stocks also continued to come under pressure, with Oracle dropping 5.15%. However, some names held up relatively well, with Microsoft (MS) gaining 0.72% and Apple rising 2.6%.

Alphabet, Google’s parent company, released its fourth-quarter results for last year after the market closed. With earnings beating market expectations, the stock was up more than 2% in after-hours trading.

Analysts said the market has entered a phase of sorting winners from losers in AI. Charu Chanana of Saxo said AI is not being shunned by the market; rather, the issue is that AI is now being priced in more cautiously.

Scott Welch, chief investment officer (CIO) at Sertiuti, said, "Since the end of last year, the market has begun to distinguish who the winners and losers are in the AI space," adding, "It seems that such a trend is continuing now."

Weakness in private-sector employment also weighed on investor sentiment. According to the Automatic Data Processing (ADP) National Employment Report, private payrolls in January rose by 22,000 from the previous month. That is less than half the 45,000 increase forecast by economists surveyed by Dow Jones.

Even amid a slowdown in hiring, the U.S. services sector continues to expand. The U.S. Services Purchasing Managers’ Index (PMI) for January, released that day by S&P Global, came in at 52.7, beating the market forecast of 52.5.

The Institute for Supply Management (ISM) also reported that its Services PMI for January stood at 53.8, above the market expectation of 53.5.

As investors rotated out of technology stocks into blue chips, the Dow rebounded. Amgen rose 8.15%, and Honeywell gained 1.92%.

Welch, the CIO, said, "This is just a natural rotation." He noted that for a long time the market had been dominated by large growth stocks, during which value stocks were neglected, small caps were hit, and markets outside the United States were effectively ignored. "In fact, last year these markets delivered almost twice the performance of the U.S. market," he said.

U.S. Treasury yields were mixed. The 10-year U.S. Treasury yield, the global benchmark for bond rates, was at 4.278%, up 0.5 basis point (1 bp = 0.01 percentage point) from the previous day, while the 2-year U.S. Treasury yield, which is sensitive to monetary policy, was at 3.555%, down 1.7 basis points from the previous day.