Wall Street Plunges as Soaring Inflation Crushes Tech; Nasdaq Tumbles 1.88%

September CPI rose 3.7% compared to the previous year... Semiconductor index falls 4.30% due to growing concerns about additional interest rate hikes by the Federal Reserve... Major stocks of medical and consumer staples rise

As U.S. inflation grew stronger again, the New York stock market fell all at once on the 14th (local time). As concerns about additional interest rate hikes by the Federal Reserve (Fed) grew, selling was focused on semiconductor and artificial intelligence (AI)-related stocks. The debt burden of AI infrastructure companies also weighed on investor sentiment. Major stocks of medical and consumer staples rose, showing a contrasting trend with technology stocks.

On this day, the Dow Jones Industrial Average ended trading at 51,621.48, down 48.62 points (0.09%) from the previous day. The Standard & Poor's (S&P) 500 index fell 86.51 points (1.11%) to 7718.94, and the Nasdaq Composite Index fell 511.51 points (1.88%) to 26,692.87.

The fall in semiconductor stocks was even greater. The Philadelphia Semiconductor Index closed at 11,684.38, down 524.41 points (4.30%). With a decline for 6 consecutive trading days, the semiconductor industry continued to be weak.

What shook investor sentiment was the September Consumer Price Index (CPI), which was announced before the market opened. According to the U.S. Bureau of Labor Statistics (BLS), the CPI in September rose 0.6% compared to the previous month and 3.7% compared to the same month last year. The annual growth rate increased from 3.4% in August and also exceeded the market expectation of 3.6% compiled by the Wall Street Journal (WSJ).

Gasoline prices rose 9.1% in one month, accounting for more than half of the total monthly price increase. Rising pressure was also confirmed in prices excluding energy. Core CPI, excluding food and energy, rose 0.3% compared to the previous month and 2.6% compared to the same month last year. Housing costs rose 0.4% from the previous month, and used car and airfare prices also increased.

After the price announcement, the market reflected a higher possibility of further tightening by the Federal Reserve. According to the Chicago Mercantile Exchange (CME) FedWatch cited by Reuters on this day, the probability of an interest rate hike in October rose from 22% the previous day to 37%.

Such concerns have acted as a burden for AI-related companies that continue to make large-scale facility investments. If high interest rates continue, the cost of financing needed to build a data center and secure equipment may increase. In the market, there has been a trend of reconsidering the burden of investment costs along with expectations for AI growth.

By stock, Nvidia fell 3.16% and Broadcom fell 3.10%. AMD fell 5.73%, Intel fell 4.56%, and Micron fell 4.10%. Semiconductor equipment companies Lam Research and Applied Materials also fell 4.71% and 3.79%, respectively, spreading the weakness throughout the semiconductor supply chain.

Among AI infrastructure-related stocks, Coreweave fell about 15% as concerns about debt burden and future financing increased due to a plunge in corporate bond prices. Whether it will be possible to continuously secure the investment needed to expand AI infrastructure has emerged as a topic of interest in the market. In a memo to employees, CEO Mike Intrater explained that the company's order backlog fully supports its debt obligations.

Oracle also fell 8.83%, and Dell Technologies fell more than 11%. In the case of Dell, it was also burdensome that Barclays lowered its investment opinion from 'overweight' to 'equal weight' due to concerns about the pace of growth in enterprise AI spending.

Among large technology stocks, Microsoft fell 1.80% and Meta fell 3.27%. Alphabet and Amazon fell 1.74%, respectively, and Tesla fell 2.15%. Apple rose 0.49%, showing a relatively solid trend among major technology stocks.

Major stocks of medical and consumer staples showed a different trend than technology stocks. UnitedHealth rose 4.73%, Eli Lilly rose 3.62%, and Johnson & Johnson rose 2.13%. Walmart and Costco also rose 3.46% and 2.87%, respectively.

The direction of the bond market changed during the day. The 10-year U.S. Treasury bond yield jumped immediately after the CPI was announced, but later reversed the increase. According to WSJ, at 3:54 p.m. New York time, the 10-year interest rate was about 5.19%, lower than 5.216% the previous day.

The next targets to check are corporate performance and follow-up economic indicators. TSMC will hold a third quarter performance briefing today (15th) at 3:00 PM, Korean time. As semiconductor stocks continue to weaken, we plan to check AI demand and future sales forecasts. At 9:30 p.m. on the same day, the U.S. producer price index (PPI) for September and breaking retail sales figures for September will be announced.