Key points:

  • All three major US indices ended the session with sharp declines.
  • Investors have become more cautious about technology stocks amid the second-quarter earnings season.
  • The VIX volatility index has increased: this indicates growing anxiety among traders.

After initial growth, US stock indices showed a correction, returning to a downward trajectory. Investors have become more cautious about large-cap tech stocks as second-quarter earnings season heats up.

All three major US indices suffered losses. The Dow Jones Industrial Average, which had hit record closing highs in recent days, showed the most significant decline, falling 1.29% to 40,665.02 points. The S&P 500 lost 0.78% to close at 5,544.59 and the Nasdaq Composite lost 0.7% to finish at 17,871.22.

Investor anxiety

Sales of shares continued, developing the corrective movement that began the day before. The Nasdaq suffered its biggest one-day drop since December 2022, and the chip sector posted its biggest single-day percentage drop since the pandemic-induced lockdown in March 2020. The CBOE Volatility Index (VIX), known as the “fear index“, rose to its highest levels since early May.

The Russell 2000 index, which represents small-cap companies, is in the red for the second day in a row. Previously, it experienced a sharp rise of 11.5%, becoming the growth leader after five days.

In economic news, the number of initial jobless claims exceeded analysts’ forecasts. This is another signal that the US labor market is showing signs of cooling, which, according to the Fed, is a necessary condition for slowing inflation and, accordingly, the prospect of lowering interest rates.

Thus, traders have become more cautious amid conflicting signals: on the one hand, corporate reporting shows mixed results, on the other, the labor market remains stable.

TSMC shares fall sharply as Nasdaq declines

Shares of TSMC, traded on the Taipei Exchange, ended Friday down 3.5%. Continued geopolitical concerns and one-day losses in US markets contributed to the decline.

Despite these factors, TSMC, Asia’s largest chipmaker and a key supplier to Apple and Nvidia, posted strong financial results. The company reported strong quarterly profit, beating market expectations, and raised its full-year revenue forecast.

TSMC’s growth in recent years has been driven by a global boom in artificial intelligence, which has partially offset the decline in electronics demand caused by the pandemic.