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Chip stocks slump on China trade worries, tech rout

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J&J flat after cutting annual profit forecast

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Lilly down as rival Roche reports early data for obesity

pill

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Spirit Airlines ( SAVE ) shares slip after lowered Q2 forecast

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Futures down: Dow 0.28%, S&P 500 0.96%, Nasdaq 1.46%

(Updated at 8:40 a.m. Et/1240 GMT)

By Lisa Pauline Mattackal and Ankika Biswas

July 17 (Reuters) -

Indexes were set to open lower on Wednesday, as declines in

major chip and tech stocks led broad-based market losses amid a

slew of corporate results and the prospect of tougher U.S. trade

restrictions being imposed on Chinese chips.

A report that the Biden Administration was considering

severe trade restrictions as part of a chip clampdown against

China weighed on semiconductor stocks in premarket trading.

AI-chip favorite Nvidia ( NVDA ) tumbled 3.8%, while ASML's

U.S.-listing lost 8.2%.

In other moves, U.S.-listed shares of Taiwan Semiconductor

Manufacturing shed 6.0% 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 were also down between 3% and

4.7%.

All the so-called "Magnificent Seven" megacap stocks

slumped, with Apple ( AAPL ), Microsoft Meta Platforms

and Tesla down between 1% and 2.1%.

The possibility of a fresh crackdown on China trade

could be the negative trigger investors were waiting for to

start booking profits in tech stocks, according to Ahmed Azzar,

financial market analyst at Equiti Group.

Futures tracking the Russell 2000 fell 0.6%

after the small-cap index rallied nearly 12% over the

last five sessions.

Signaling growing investor unease, Wall Street's "fear

gauge" was trading at its highest level in six weeks.

The Dow Jones Industrial Average and the S&P 500

had closed at all-time highs on Tuesday.

After a blistering rally in tech companies since the

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

megacaps to underperforming areas of the market.

"I'm still optimistic that the market is not as

expensive as maybe it's feared, but that's because we're so

overbought that some near-term selling pressure is likely to

develop," said Robert Pavlik, senior portfolio manager at Dakota

Wealth, adding that he had also taken some profits in tech.

Firmer bets on a Fed 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.

Investors will focus on comments from Fed officials Thomas

Barkin and Christopher Waller later in the day for clues on how

policymakers have assessed recent economic data.

The New York Fed's

John Williams

said in an interview that the central bank was "getting

closer" to a point where it could start cutting interest rates.

On the earnings front, J&J was flat, paring losses

after the drug and devices maker lowered its annual earnings

forecast.

Industrial production data for June is also due before

markets open.

At 8:40 a.m. ET, Dow e-minis were down 116

points, or 0.28%, S&P 500 e-minis were down 55 points,

or 0.96%, and Nasdaq 100 e-minis were down 300.75

points, or 1.46%.

Among others, U.S. drugmaker Eli Lilly ( LLY ) fell 3.4%

after Swiss rival Roche's promising early-stage data

from an experimental obesity pill.

Spirit Airlines ( SAVE ) slumped 4% after lowering its

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

non-ticket revenue.

Northern Trust ( NTRS ) rose 2.1% after the asset and wealth

manager reported a jump in second-quarter profit on higher fees

and an accounting gain.