The Nasdaq 100 Index erased an early-morning rally as a report on the US potentially revoking waivers for companies with semiconductor plants in China rattled chipmakers and the broader technology sector.
The tech-heavy benchmark fell 0.3% at 2:28 p.m. in New York after gaining as much as 0.8% earlier in the session. Meanwhile, the S&P 500 Index was down 0.1%, also pulling back from an earlier advance. The Cboe VIX Index hovered around 20.
The Wall Street Journal reported that a US Commerce Department official has told top semiconductor companies he wants to revoke waivers they have used to access American technology in China.
Steve Sosnick, chief strategist at Interactive Brokers, said the early session rally “was fading already, then the chip comments didn’t help the mood.”
Chipmakers dropped in response to the news, with Nvidia Corp., Taiwan Semiconductor Manufacturing Co Ltd., Lam Research Corp. and KLA Corp. among the notable decliners. Additionally, the Philadelphia Stock Exchange Semiconductor Index, a closely watched benchmark, fell 0.7%.
“Anything that throws cold water on the sector is unhelpful to US equity markets,” Sosnick added. “That said, the dip was somewhat modest and quickly absorbed. It could be perceived as a relative benefit to US chipmakers if foreign competitors get their wings clipped too.”
Earlier on Friday, Fed Governor Christopher Waller said the central bank could lower interest rates as soon as next month, reiterating his view that an inflation hit from tariffs would likely be short-lived. Waller said economic data shows GDP growth and inflation are running close to the Fed’s targets.
“I think we’ve got room to bring it down, and then we can kind of see what happens with inflation,” Waller said in an interview on CNBC, adding the central bank could pause cuts if needed due to a shock from events, such as the crisis in the Middle East.
The comments follow the Fed’s decision on Wednesday’s to keep interest rates on hold. Fed officials continued to pencil in two interest-rate cuts this year, though new projections showed a growing divide among policymakers over the trajectory for borrowing costs as tariffs make their way through the US economy. Officials also downgraded estimates for economic growth this year and projected higher inflation.
“The Fed appears to be keeping all options open, which we believe helps support market confidence in a rapidly changing geopolitical environment,” said Brian Buetel, managing director at UBS Wealth Management.
President Donald Trump indicated on Thursday that a decision on striking Iran would be made within two weeks, but signaled that he would give diplomacy a chance. Trump, who is scheduled to attend a national security meeting in the Oval Office on Friday, has publicly mused for days about the US joining the conflict with Israel and Iran.
Hostilities between those countries continued for an eighth day. Iran on Friday restated that it would not negotiate with the US while an Israeli attack continues. The only way to end the imposed war is to “unconditionally stop” the enemy’s aggression, Iranian President Masoud Pezeshkian said in a post on X.
“There were already a lot of unknowns for investors to contend with and we’ve added another with the Israel/Iran conflict,” wrote Tom Essaye, founder of The Sevens Report newsletter. “Those unknowns will act as a weight on equities near term and make rallies a bit harder to manufacture, but these unknowns are not, by themselves, enough to cause a correction.”
Among singular stocks, Kroger Co. shares advanced after sales surpassed expectations, providing a sign that consumers are still spending on groceries and other essentials, even amid economic turbulence. Accenture plc fell as analysts flagged bookings as a weak spot.
“It’s important for investors to stay disciplined in the second half of this year, which could be defined by more volatility based on geopolitical tensions and elevated headline risk,” said UBS Wealth Management’s Buetel. “Maintaining portfolio diversification without reacting to short-term noise is the name of the game for 2025.”
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