Wall St falls as Treasury yields rise after strong sales data, chipmakers slide

By Ankika Biswas and Shashwat Chauhan

(Reuters) – Wall Street’s main indexes fell on Tuesday as Treasury yields rose following hotter-than-expected economic data, while chipmakers fell after the Biden administration said it was halting shipments of AI chips to China.

U.S. retail sales rose 0.7% in September, compared with estimates of a 0.3% rise, according to economists polled by Reuters, as households boosted purchases of motor vehicles and spent more at restaurants and bars, suggesting the economy ended the third quarter on a strong note.

“This is a persistent story … you can never bet against the U.S. consumer, and this is evidence of it,” said Thomas Hayes, chairman at Great Hill Capital.

U.S. Treasury yields extended their advance after the data, with 10-year yields up at 4.8552%, pressuring megacaps Apple, Microsoft, Alphabet and Amazon.com, down between 0.9% and 1.9%.

Nvida dipped 6.8% after the Biden administration said it plans to halt shipments of advanced artificial intelligence chips to China.

Other chip stocks Advanced Micro Devices, Marvell Technology, Qualcomm and Arm Holdings fell between 1.5% and 3.8%.

The Philadelphia SE Semiconductor index dropped 3% to hit a near two-week low.

On the earnings front, Bank of America gained 0.5% as it joined rivals in earning more from interest payments by its customers, while investment banking and trading fared better than expected.

Goldman Sachs third-quarter profit dropped less than expected as a nascent recovery in dealmaking offset its $864 million writedown related to GreenSky fintech business and investments in real estate.

“People continue to underestimate the strength of the economy, they continue to underestimate the strength of the consumer and there’s nowhere better to reflect that than in bank earnings which have just been off the charts,” Hayes added.

Investors also kept tabs on the conflict in the Middle East as Iran’s Supreme Leader Ayatollah Ali Khamenei said Israel’s “genocide” of Palestinians in the Gaza Strip should stop immediately, state TV reported, sparking concerns the conflict could escalate.

U.S. President Joe Biden is set to visit Israel on Wednesday, after Washington said Prime Minister Benjamin Netanyahu had agreed to allow humanitarian aid to reach Gazans.

Several Federal Reserve officials are set to speak during the day, including New York’s John Williams, Richmond’s Thomas Barkin, and Minneapolis’ Neel Kashkari.

At 9:48 a.m. ET, the Dow Jones Industrial Average was down 44.46 points, or 0.13%, at 33,940.08, the S&P 500 was down 30.78 points, or 0.70%, at 4,342.85, and the Nasdaq Composite was down 176.28 points, or 1.30%, at 13,391.71.

Information technology and consumer discretionary led declines amongst the major S&P 500 sectors, while energy and materials advanced.

Among individual stocks, Dollar Tree rose 2.5% after Goldman Sachs upgraded the discount retail chain’s shares to “buy” from “neutral”.

Cloud computing firm VMware fell 8.8% as traders cited China approval uncertainty for Broadcom’s $61 billion cash-and-stock deal for the company.

Declining issues outnumbered advancers by a 1.00-to-1 ratio on the NYSE. Advancing issues outnumbered decliners by a 1.49-to-1 ratio on the Nasdaq.

The S&P index recorded six new 52-week highs and five new lows, while the Nasdaq recorded 15 new highs and 70 new lows.

(Reporting by Ankika Biswas and Shashwat Chauhan in Bengaluru; Editing by Vinay Dwivedi)