Wall Street’s major averages ended the week with losses due to an extended selloff in semiconductor stocks and other big tech names. Among the top decliners this week were ON Semiconductor – down almost 30%; Western Digital – down 23.1%; Arm Holdings – down almost 20%; and Seagate Technology – down 19.1%. After the highly anticipated SpaceX IPO, the company’s stock lost 11.3% this week. Even Micron Technology —after posting a phenomenal 3Q earnings report—saw losses this week.
Things started to deteriorate in the ceasefire agreement the U.S. and Iran reportedly agreed to continue negotiations to reach a deal within 60 days. On Friday, the U.S. military conducted retaliatory strikes against Iran, intensifying tensions between the two nations.
For the week, the S&P lost 2.0%, while the Nasdaq dropped 4.6%, and the Dow rose 0.6%.
Future Wealth’s View
While Trump may claim that the war is over and that the Strait of Hormuz is wide open, the physical reality of Hormuz tells a different story. Prewar tanker crossings ran up to 140 per day. Monday saw 27. Tuesday saw 14. It is estimated that 1150 ships with $125 billion in cargo remain stranded in the Persian Gulf. It appears Iran has not agreed to any ceasefire – Iran attacked a ship on Wednesday – the busiest Hormuz transit day since the war. Neither has Iran agreed to nuclear inspectors yet, which is the central condition of the deal. By Friday, the US retaliated and we are now back at war. As with most things with Trump – he makes up lies that he expects everyone will accept. Iran is taking none of that. And neither will Israel – which started the war in the first place.
Inflation continues to be a problem for consumers as both Apple and Microsoft raised hardware prices because memory chips cost too much. PCI and PCE – both measures of inflation – hit its highest level since 2023. With the resumption of war, energy prices will likely stay high prompting the Fed to stay put or even consider a rate hike. The sell off in tech stocks appears to be the first sign of the market getting accustomed to a higher rate environment. When we begin to see the Dow hit records while S&P 500 and Nasdaq post sharp declines, it is a sure sign of rotation away from technology heavy indexes to the most staid and stable companies that make up the Dow.
In the end, it is important to remember that while short term market moves are unpredictable, longer term investment set ups tend to be sustainable if investors could look past the next headline.