Dow falls nearly 400 points as chip selloff deepens, Wall Street posts weekly loss

• The Philadelphia Semiconductor Index recorded its steepest weekly loss in over a year, falling nearly 18% in July, though still up about 65% year-to-date.
• Despite market weakness, 90% of the 49 S&P 500 companies reporting earnings have exceeded expectations, with aggregate Q2 earnings growth now projected at 26%, up from 19.2% in early April.
• Middle East tensions escalated as U.S.-Iran military strikes disrupted energy flows through the Strait of Hormuz, pushing WTI crude above $81 and Brent above $86, making energy the best-performing S&P 500 sector.

Market Summary: Dow Falls Nearly 400 Points on Chip Selloff

Key Market Movements

U.S. stocks closed lower Friday, with the Dow Jones falling 394 points (-0.75%) to 52,158.96, the S&P 500 declining 1.01% to 7,457.78, and the Nasdaq dropping 1.40% to 25,511.12. For the week, the S&P 500 lost over 1%, the Nasdaq fell more than 2%, and the Dow slipped nearly 1%.

Semiconductor Sector Under Pressure

The VanEck Semiconductor ETF (SMH) plunged more than 8% for the week, marking its third weekly decline in four weeks. The Philadelphia Semiconductor Index posted its steepest weekly loss in over a year and has fallen nearly 18% in July, though remains up 65% year-to-date. The selloff intensified following Moonshot AI's launch of its Kimi K3 model, raising concerns about increased competition and potentially reduced demand for advanced AI chips.

Corporate Developments

Netflix shares dropped over 6% after its earnings outlook failed to reassure investors about growth sustainability. Uber Technologies declined following its announced $15 billion acquisition of Germany's Delivery Hero.

Earnings Season Bright Spot

Despite market weakness, Q2 earnings remain strong. Of 49 S&P 500 companies reporting, 90% exceeded expectations. Analysts now project 26% aggregate Q2 earnings growth, up from 19.2% in early April.

Geopolitical and Economic Factors

Escalating Middle East tensions disrupted energy flows through the Strait of Hormuz, pushing WTI crude above $81 and Brent above $86 per barrel. Energy stocks outperformed as the strongest S&P 500 sector. Economic data showed mixed signals: consumer sentiment reached a five-month high, but housing starts and building permits declined.