The stock market logged another down week. The Russell 2000 fell 2.8%, the S&P 500 declined 3.1%, and the Nasdaq Composite registered a 5.5% loss. Only the Dow Jones Industrial Average managed to end the week virtually unchanged. Ongoing weakness in mega cap stocks and the semiconductor sector, which have led the market higher so far this year, had a disproportionate impact on index performance. The Vanguard Mega Cap Growth ETF (MGK) dropped 5.8% this week and the PHLX Semiconductor Index (SOX) sank 9.2%.
ASML (ASML) and TSMC (TSM) were standout losers among the semiconductor stocks, declining 10.6% and 10.4%, respectively, last week after reporting quarterly results. ASML reported weaker-than-expected Q1 bookings and TSMC reported better than expected earnings, but warned that the chip industry is enduring a more gradual recovery than expected. NVIDIA (NVDA) was another top laggard from the sector, dropping 13.6% on no specific news. Shares of NVDA are still 53.9% higher since the start of 2024.
Many stocks participated in this week’s retreat. Eight of the 11 S&P 500 sectors declined. The information technology (-7.3%), consumer discretionary (-4.5%), and communication services (-3.2%) sectors logged some of the largest declines, clipped by weakness in their mega cap constituents. The rate-sensitive real estate sector was also a top laggard, falling 3.6%. The consumer staples (+1.4%), utilities (+1.9%), and financial (+0.8%) sectors were the only sectors that logged gains.
The downside bias in stocks was also related to rising interest rates with Fed officials suggesting they are in no hurry to cut rates because recent inflation reports have not given them enough confidence that inflation is on a sustainable path to the 2% target. The 2-yr note yield settled nine basis points higher at 4.97% and the 10-yr note yield settled 12 basis points higher at 4.62%.