Semiconductor Weakness Pulls Stock Indexes Lower as Investors Reassess Market Outlook

The broader market faced headwinds on the last trading day of the year, with losses concentrated in technology-related sectors. Micron Technology, alongside other data chip and semiconductor manufacturers including KLA Corp, Western Digital, Marvell Technology, Qualcomm, and Broadcom, led the decline with losses exceeding 1% each. The pullback in these key holdings weighed on the overall market performance.

The S&P 500 retreated -0.33%, the Dow Jones Industrial Average softened -0.35%, and the Nasdaq 100 declined -0.34%. Futures markets reflected similar weakness, with March E-mini S&P 500 contracts down -0.35% and March E-mini Nasdaq futures declining -0.38%. The S&P 500 and Dow Jones touched 1-week lows, while the Nasdaq 100 fell to a 1.5-week low, signaling a shift in market sentiment.

Beyond semiconductors, commodity-linked stocks stumbled alongside precious metals. Mining equities retreated sharply, with gold prices falling to 2.5-week lows and silver plunging over -7%, dragging down names like Newmont, Barrick Mining, Freeport-McMoRan, and Hecla Mining by more than -1% to -0.5%.

Economic Backdrop Supports Recovery Potential

The weakness coincided with stronger-than-expected labor market signals. US initial jobless claims unexpectedly fell -16,000 to 199,000, marking a 1-month low and suggesting labor market resilience. This data, however, pushed bond yields higher, with the 10-year Treasury yield climbing +2 basis points to 4.14%—a factor that typically pressures equity valuations.

Positive momentum emerged from overseas. China’s manufacturing PMI rose +0.9 to 50.1 in December, the strongest pace in 9 months and beating forecasts of 49.2. Non-manufacturing PMI climbed +0.7 to 50.2, surpassing expectations of 49.6. These improvements signal potential support for global growth trajectories.

Individual Stock Catalysts

Vanda Pharmaceuticals surged over +31% after FDA approval of its Nereus drug for motion-induced nausea prevention. Terawulf jumped more than +5% following an outperform upgrade from Keefe, Bruyette & Woods with a $24 price target. Nike advanced over +2% in the Dow Jones index, buoyed by insider buying signals as CEO Hill purchased approximately $1 million in shares on Monday.

Meanwhile, Corcept Therapeutics collapsed over -51% after the FDA rejected its relacorliant candidate, citing insufficient efficacy data. GlobalFoundries declined over -2% after Wedbush downgraded the stock to neutral.

Market Dynamics and Year-End Positioning

Trading volumes remained subdued as German and Japanese markets closed for the New Year holiday. European equity indexes showed mixed performance, with the Euro Stoxx 50 down -0.08%. March 10-year Treasury notes declined -4 ticks, with yields touching 4.138%.

Despite near-term weakness in data chip and semiconductor stocks, historical seasonal patterns suggest potential strength ahead. Since 1928, the S&P 500 has rallied 75% of the time during the final two weeks of December, with an average gain of 1.3%. The Fed futures market is pricing only a 15% probability of a -25 basis point rate cut at the January 27-28 meeting, leaving room for equity recovery as market participants recalibrate expectations around economic growth signals and monetary policy.