Nasdaq 100 Falls 1% as Nvidia, ASML Get Crushed: Markets Wrap

(Bloomberg) -- Stocks got hit as disappointing earnings from Europe’s most-valuable tech company and concern about tighter US restrictions on chip sales spurred a selloff in the industry that has powered the bull market.

A closely watched gauge of semiconductors saw its worst plunge since early September, dragging down equities from record highs. US-traded shares of ASML Holding NV plunged 16% after issuing a bearish outlook as its orders missed estimates. Nvidia Corp. lost 5% on a news report US officials have discussed capping sales of advanced AI chips from the company and other American firms on a country-specific basis.

Investors got so bullish that it might be time to sell global stocks, according to an investor survey by Bank of America Corp. Allocations to equities surged, while bond exposure sank and cash levels in global portfolios fell to 3.9% in October from 4.2% last month, triggering a “sell signal”, strategists led by Michael Hartnett wrote.

“Equity markets have rallied solidly over the last week amid a combination of earnings optimism and soft-landing hopes,” said Tom Essaye at The Sevens Report. “If any of the economic data, Fed chatter, or earnings results damage either of those narratives, expect some mild profit taking in equities today.”

The S&P 500 slipped 0.4%. The Nasdaq 100 fell 1.2%. The Dow Jones Industrial Average slid 0.4%. UnitedHealth Group Inc. plunged on a disappointing outlook. Apple Inc. shares hit a record high. Bank of America Corp. climbed 2% as earnings topped estimates. Goldman Sachs Group Inc. and Citigroup Inc. fell despite solid results.

Treasury 10-year yields declined six basis points to 4.04%. Oil plunged 5% as a report that Israel may avoid targeting Iran’s crude infrastructure eased concerns about a potential supply disruption. Later, Israeli Prime Minister Benjamin Netanyahu asserted the country is free to act as it chooses in a counter-strike.

US stocks are set to extend their rally into the final months of the year, pushing the S&P 500 past 6,000, as corporate buyers re-enter the market and institutional investors drop their hedges, according to Scott Rubner at Goldman Sachs Group Inc.

“The equity-market selloff is canceled, and a year-end rally is starting to resonate with clients shifting from hedging from the left-tail to the right-tail as institutional investors are getting forced into the market right now,” Rubner wrote in a note to clients Tuesday, adding that professional investors are growing concerned about materially underperforming their benchmarks.

Meantime, UBS Group AG is upgrading its outlook for US equities once again for this year and next, citing strength in corporate earnings and risks that are skewed to the upside, from easing inflation to interest-rate cuts by the Federal Reserve.

The team led by Jonathan Golub and Patrick Palfrey lifted year-end targets on S&P 500 to 5,850 in 2024 and 6,400 in 2025 from 5,600 and 6,000, respectively.

“Fiscal and monetary policy uncertainty, and potential election outcomes, make 2025 returns far from certain,” strategists wrote.

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