S&P 500 Slips as Rout in Chips Weighs

The S&P 500 fell Monday, driven by a chip-fueled decline in tech after the White House unveiled new export restrictions on U.S. companies selling semiconductor chips and other chip-making equipment to China.

The S&P 500 fell 0.64%, the Dow Jones Industrial Average slipped 0.22%, or 63 points, and the Nasdaq fell 0.9% and hit a two-year low intraday.

Fresh U.S. export control restructuring aimed at stopping Beijings chipmaking abilities and advancing its military capabilities sent chip stocks about 4% lower.

Lam Research Corp (NASDAQ:LRCX), Coherent Inc (NASDAQ:COHR), and NVIDIA Corporation (NASDAQ:NVDA) led the decline in semis even as the latter said it didnt expect the new export ban to have a material impact on its business.

Big tech, Apple (NASDAQ:AAPL) excluded, added to recent losses with Microsoft (NASDAQ:MSFT) and Alphabet (NASDAQ:GOOGL) leading to the downside as sentiment on tech remains under pressure amid fears that the Federal Reserve will deliver another 75-basis-point rate hike next month.

“We continue to expect that the Fed will hike by 75bp in November, 50bp in December, and 25bp in February to reach a terminal forecast of 4.5-4.75%,” Goldman Sachs said in a note.

Fed vice chair Lael Brainard said Monday that a “second-half rebound will be limited, and that real GDP growth will be essentially flat this year.”

The slowing growth, however, doesnt appear to be dissuading the Fed from its path of monetary policy. The slowdown in economic growth due to monetary policy tightening “is only partly realized so far,” Brainard said.

Consumer stocks were also in the red, pressured by a slump in autos after UBS downgraded Ford Motor (NYSE:F) and General Motors (NYSE:GM) on worries of “demand destruction” for automakers next year as supply will likely exceed demand.

UBS downgraded General Motors to neutral from buy and cut the price target to $38 from $56, and Ford to sell from neutral, with a price target of $10 down from $13.

Rivian Automotive (NASDAQ:RIVN), meanwhile, fell 9% after the electric vehicle pickup maker said it will recall nearly all of its EVs, due to a possible loose fastener in the vehicles front suspension.

Defensive corners of the market including utilities and consumer staples bucked the trend lower to trade in the green.