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Chip stocks tumble on China trade worries, tech sell-off

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J&J up after beating estimates on strong drug sales

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Lilly down as rival Roche reports early data for obesity

pill

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Spirit Airlines ( SAVE ) slips after lowered Q2 forecast

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Indexes: Dow up 0.07%, S&P down 0.96%, Nasdaq down 1.83%

(Updated at 9:45 a.m. ET/1345 GMT)

By Lisa Pauline Mattackal and Ankika Biswas

July 17 (Reuters) -

The Nasdaq slumped nearly 2% to a two-week low on Wednesday,

accompanied by losses on the S&P 500, as major chip and tech

stocks were pressured by the prospect of tighter U.S. trade

curbs on companies giving China access to advanced semiconductor

technology.

A report that the Biden Administration was considering

severe trade restrictions as part of a chip clampdown against

China weighed on semiconductor stocks, sending the Philadelphia

SE Semiconductor index spiraling 3.5% to a two-week low.

AI-chip favorite Nvidia ( NVDA ) fell 4.3%, while ASML's

U.S.-listing slumped 9.2%.

U.S.-listed shares of Taiwan Semiconductor Manufacturing

shed 6.4% after Republican presidential candidate Donald

Trump said Taiwan should pay the U.S. for its defense.

Marvell Technology ( MRVL ), Broadcom ( AVGO ), Qualcomm ( QCOM )

, Micron Technology ( MU ), Advanced Micro Devices ( AMD )

and Arm Holdings also fell over 5% each.

All the so-called "Magnificent Seven" megacap stocks

slumped, with Apple ( AAPL ), Microsoft Meta Platforms

and Tesla down between 1.2% and 2.7%.

"Whether Big Tech can keep the leadership will depend on

earnings. Pullbacks are healthy and give the markets a chance to

reset and they give buyers a chance to show up and buy at better

prices," said Adam Sarhan, Founder & CEO, 50 Park Investments.

The S&P 500 tech index led sectoral losses

with a 2.7% decline, while energy was the top gainer and

was up 1.3%.

The small-cap Russell 2000 index also lost 0.2%

after rallying nearly 12% over the last five sessions.

Signaling growing investor unease, Wall Street's "fear

gauge" briefly hit its highest mark in six weeks.

The blue-chip Dow, however, held some ground,

with Johnson & Johnson ( JNJ ) rising 2.7% after a

second-quarter results beat and Intel ( INTC ) bucking the chips

rout to gain 3%.

After a blistering rally in tech companies since the

last leg of 2023, investors have begun moving out of expensive

megacaps to underperforming market sectors.

Firmer bets on a Federal Reserve rate cut in September as

well as rising expectations that former President Donald Trump

will be back in the White House in November following the

attempt on his life have helped lift stocks in the last few

sessions.

Fed officials including New York's John Williams and Board

Governor Christopher Waller both noted that the central bank was

"getting closer" to the point where it could start cutting

interest rates, with Richmond's Thomas Barkin saying the U.S.

was at the "back end" of inflation.

In economic data, production at U.S. factories increased

more than expected in June, contributing to a

solid rebound

in second-quarter output, although higher borrowing costs

remain a constraint.

At 9:45 a.m. ET, the Dow Jones Industrial Average

was up 28.20 points, or 0.07%, at 40,982.68, the S&P 500

was down 54.33 points, or 0.96%, at 5,612.87, and the Nasdaq

Composite was down 338.95 points, or 1.83%, at

18,170.39.

U.S. drugmaker Eli Lilly ( LLY ) fell 2.3% after Swiss rival

Roche's promising early-stage data from an experimental

obesity pill.

Spirit Airlines ( SAVE ) slumped 8.2% after trimming its

second-quarter revenue outlook, citing lower-than-expected

non-ticket revenue.

Declining issues outnumbered advancers for a 1.26-to-1 ratio

on the NYSE, and for a 1.62-to-1 ratio on the Nasdaq.

The S&P index recorded 49 new 52-week highs, while the

Nasdaq recorded 93 new highs and nine new lows.