US Stocks Fall as Chip Slump Fuels Rotation Trade: Markets Wrap

(Bloomberg) — US stocks fell as a deepening rout in chipmakers was tempered by investors rotating into sectors that have seen the strongest earnings so far this season. Bonds climbed as oil fell.

Nasdaq 100 futures slid 1.1%, with the index set for a five-day run of losses for only the second time this year. A closely watched exchange-traded fund tracking semiconductor stocks tumbled 4.2% in premarket trading. S&P 500 contracts fell 0.2%. ETFs covering real estate and consumer staples outperformed.

A similar pattern played out in Europe, where ASML Holding NV extended losses for the week to 11% following the emergence of a possible Chinese state-backed rival. The Stoxx 600 fluctuated. Advancing stocks outnumbered decliners even as earnings from Barclays Plc, LVMH and Unilever Plc drew a mixed reaction.

While the weekslong volatility in chipmakers is rumbling on amid fresh concerns over artificial intelligence spending and rising competition from China, traders are rotating into sectors that have delivered the highest percentage of beats. Real estate, materials and utilities have seen every company top estimates so far, according to data compiled by Bloomberg Intelligence.

Lower crude prices eased inflationary angst, with Brent dropping 2% to $86.65 a barrel. The global benchmark is falling for a third straight day as the US and Iran extended their pause in hostilities. Focus will now turn to talks between Tehran and Oman over restarting traffic in the Strait of Hormuz.

“What’s taking place is a real rotation out of chips where positioning was — and somewhat remains — very heavy,” said Olivier David, a fund manager at Vega Investment Solutions in Paris. “The strength of this earnings season means that investors have options.”

Coca-Cola Co. rose 2.8% after boosting its outlook. Visa Inc. and KLA Corp. are among other companies expected to report Tuesday, ahead of make-or-break earnings from Amazon.com Inc., Meta Platforms Inc. and Microsoft Corp. over the next two days.

Asia bore the brunt of Tuesday’s selling. The regional benchmark headed for a correction after SK Hynix Inc. and Samsung Electronics Co. tumbled more than 13% in Seoul.

Treasuries extended gains ahead of Wednesday’s Federal Reserve interest rate decision as investors dialed back their expectations for tighter policy over the next 12 months. Even so, money markets continued to price around a 35% chance of a Fed hike on Wednesday as inflation risks remain elevated.

Citadel Securities is among those expecting a hike, arguing that the move would strengthen Fed Chair Kevin Warsh’s credibility in the battle against inflation.

“Tensions in French, Belgian or even US yields are not solely linked to the Middle East but have structural drivers,” said Vincent Juvyns at ING Groep NV. While he doesn’t expect a Fed hike this week, “it’s important for investors not to lower their guard” as stagflation risks have not gone away.

What Bloomberg Strategists Say

“The key uncertainty this week is the Fed. A hike would be unequivocally dollar bullish and the currency may finally break out of the past month’s range. If the Fed stays on hold, the greenback is likely to wobble initially, but hikes would be delayed rather than priced out altogether. That doesn’t undermine the broader bull case.”

— Skylar Montgomery Koning, macro strategist. Click here for the analysis.

Corporate News:

GSK Plc’s new chief executive officer aims for annual savings of £1.9 billion ($2.5 billion) by 2029, as the drugmaker invests more in its pipeline to replace revenue from the looming patent expiry of an HIV medicine. PayPal Holdings Inc., the embattled payments firm that received a takeover offer earlier this year, reported second-quarter earnings that beat analysts’ estimates as the company’s reorganization strategy made progress. United Parcel Service Inc. boosted its sales guidance for the year, suggesting the courier is benefiting from strong pricing as it works to shift volume from low-margin e-commerce shipments to more-profitable packages. Barclays Plc shares dropped the most in more than a year after its second-quarter earnings showed US consumer banking and investment bank growth had not matched up to the pace set by larger American rivals. Unilever Plc’s sales rose more than expected as consumers in key markets including India and Indonesia snapped up its Dove soap and Rexona deodorants. Some of the main moves in markets:

Stocks

S&P 500 futures fell 0.2% as of 7:11 a.m. New York time Nasdaq 100 futures fell 1.1% Futures on the Dow Jones Industrial Average rose 0.5% The Stoxx Europe 600 was little changed The MSCI World Index fell 0.2% Currencies

The Bloomberg Dollar Spot Index rose 0.1% The euro fell 0.1% to $1.1357 The British pound fell 0.1% to $1.3275 The Japanese yen fell 0.1% to 163.94 per dollar Cryptocurrencies

Bitcoin fell 2.4% to $63,322.55 Ether fell 3.8% to $1,872.23 Bonds

The yield on 10-year Treasuries declined two basis points to 4.62% Germany’s 10-year yield declined one basis point to 3.12% Britain’s 10-year yield declined three basis points to 4.96% Commodities

West Texas Intermediate crude fell 1.5% to $81.34 a barrel Spot gold fell 1.2% to $4,027.67 an ounce This story was produced with the assistance of Bloomberg Automation.

–With assistance from Neil Campling.

©2026 Bloomberg L.P.