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The semiconductor sector plummets on news of government restrictions concerning Huawei

plunge
From Yun Li:
KEY POINTS
  • Shares of chip suppliers are under pressure following the Trump administration's restrictions on doing business with Huawei.
  • Google has suspended business activity with the Chinese giant. Other Huawei suppliers, including Qualcomm, Broadcomm and Intel, reportedly told employees they will not sell to the Chinese firm until further notice.
  • U.S. chip suppliers are losing a big customer as Huawei purchases $20 billion of semiconductors each year, according to an Evercore estimate.
A sell-off in chip stocks intensified Monday following a report that semiconductor makers are cutting ties with Huawei following restrictions imposed by President Donald Trump's administration.
The U.S. Commerce Department last week blacklisted Huawei and effectively halted its ability to buy American-made parts and components. In wake of the restrictions, Google has suspended business activity with the Chinese giant. Other Huawei suppliers, including Qualcomm, BroadcomIntel and Xilinx, told employees they will not sell to the Chinese firm until further notice, according to Bloomberg News.
U.S. chip suppliers are losing a big customer as Huawei, the world's largest provider of telecom equipment, purchases $20 billion of semiconductors each year, according to an Evercore estimate.
Shares of Xilinx tumbled nearly 5% on Monday, while Qualcomm stock dropped nearly 5%. Shares of Analog Devices, Broadcom, Advanced Micro Devices are all under pressure following the Huawei ban. The VanEck Vectors Semiconductor ETF are down more than 3% on Monday, almost 15% below its intraday all-time high. All but one component of the ETF is correction levels or worse as of Monday and almost half the 25 stocks is in bear market levels. "Let's be clear - we are talking tens of billions of dollars impact," said C.J. Muse, senior equity research analyst at Evercore, in a note on Saturday. "Loss of this business would slow down investments by U.S. chipmakers, thereby reducing the competitiveness of the U.S. semiconductor industry - and that is a national security issue that the U.S. government needs to consider as well." U.S. restrictions could particularly hurt companies that have meaningful revenue exposure to 5G and the Chinese market, according to RBC analyst Mitch Steves. Analog Devices has 12.5% of revenue exposure to 5G, while Skyworks SolutionsQorvo, Broadcom, Qualcomm and Xilinx are all relying on the growth from 5G infrastructure, Steves said. Advanced Micro Devices and Nvidia are the two companies responsible for high-end data center computing, the analyst said. "We view the Huawei and China/US relationship as a negative overhang on the semiconductor space and a lift of either would likely send the semiconductor industry materially higher (5-10% in our view)," Steves said in a note on Sunday. The administration's move to cut off Huawei's access to U.S. technology followed its tariff hike on $200 billion worth of Chinese goods earlier this month, which sent the semiconductor sector into a downward spiral. "This decision was likely a negotiation tactic by the Trump administration to bring China back to the table," Evercore's Muse said. "The clear risk here is that while President Trump believes he has achieved leverage in the negotiations, we may have pushed China past the precipice and that the current technology cold war gets engrained and accelerates." -- CNBC's Michael Bloom contributed to this report.

The VanEck Vectors Semiconductor ETF (SMH) was trading at $102.23 per share on Monday afternoon, down $3.20 (-3.04%). Year-to-date, SMH has gained 4.52%, versus a 7.08% rise in the benchmark S&P 500 index during the same period. SMH currently has an ETF Daily News SMART Grade of A (Strong Buy), and is ranked #16 of 81 ETFs in the Technology Equities ETFs category.
This article is brought to you courtesy of CNBC.
NYSE:SMH May 20, 2019 1:10pm

The Nasdaq slides on the US gov. crackdown on Huawei

nasdaq logo
From Fred Imbert: Stocks fell on Monday as the intensifying fallout from a U.S. crackdown on Huawei pressured the technology sector.
NASDAQ:QQQ May 20, 2019 12:40pm

The movement of the Yuan is a warning signal about the US-China trade war

trade chineasusflag
From Patti Domm:
NYSE:CNY May 20, 2019 11:30am

BofA-Merrill Lynch is warning investors about getting involved in small cap stocks

From Stephanie Landsman: As investors try to cope with the ongoing U.S.-China trade war, BofA-Merrill Lynch is telling investors to resist the temptation to invest in small cap stocks.
NYSE:IWO May 20, 2019 10:24am

What is the best performing stock in the S&P 500 in 2019?

From Keris Lahiff: One stock has been a surprise winner on the S&P 500 this year: Coty.
NYSE:SPY May 17, 2019 3:08pm

Why does China continue to be the largest gold consumer in the world?

china flag
From CME Group:
Gold has long enjoyed deep cultural significance in China, which holds the title for being both the world's largest gold consumer and its largest producer. Demand for the yellow metal in China looks like it will continue to rise, driven by a combination of increasing levels of wealth, global economic uncertainty and changing central bank policy.
NYSE:GDX May 17, 2019 1:18pm

Why is Wall Street skeptical about the cannabis sector?

Marijuana
From Sean Williams:

If you think the broad-based stock market is on fire, then you obviously haven't been paying close enough attention to the legal cannabis industry. This year alone, marijuana stocks have run circles around the S&P 500 in terms of total return, and marijuana's "Big Three" -- Canopy GrowthAurora Cannabis, and Cronos Group -- have all delivered huge quadruple-digit-percentage gains since the beginning of 2016.

NYSE:MJ May 17, 2019 1:15pm

Treasury Inflation-Protected Securities ETF hits a 52 week-high

From Zacks: For investors seeking momentum, iShares TIPS Bond ETF TIP is probably on radar now. The fund just hit a 52-week high, and is up 5.8% from its 52-week low price of $107.53 per share.
NYSE:TIP May 17, 2019 10:55am

As the trade-war escalates, where are oil prices headed?

From Kathy Lien:
This has been a great year for oil. The price of crude is up 30 percent from its December low and oil bulls are wondering if there's more room to rise. The economy is recovering and many central bankers including Federal Reserve Chairman Jerome Powell feel that uncertainty is easing, and global growth is improving.
NYSE:USO May 17, 2019 10:50am

Nomura Instinet downgrades housing stocks

From Dave Royse: Nomura Instinet downgraded several companies dependent on housing market growth Thursday, citing U.S.-China trade uncertainty that could put a damper on consumer confidence and economic growth.
NYSE:XHB May 17, 2019 10:43am

Bank stocks gain as the 10-year Treasury yield climbs back above 2.4%

stock board 2019
From Fred Imbert: Stocks rose on Thursday as sentiment was boosted by strong earnings from Walmart and Cisco Systems while banks climbed on higher rates.
NYSE:XLF May 16, 2019 6:16pm

British pound drops to a 3-month low

recession
From Despite repeated parliamentary votes to rule out the prospect of the U.K. leaving the European Union without a deal in place to govern its relationship with the bloc, the revived threat of a "no-deal" Brexit put renewed pressure on the British pound Thursday.
NYSE:FXB May 16, 2019 6:14pm

Utilizing ETFs to successfully navigate stock market volatility

From McKenzie Stratigopoulos:

An ETF expert says that investors can hedge against market swings by focusing on ETFs that specifically target lower volatility stocks.

NYSE:SPLV May 16, 2019 1:31pm

Goldman Sachs reduces exposure to emerging markets due to tensions between the U.S. and China

Goldman Sachs logo
From Spriha Srivastava: The investment management arm of Goldman Sachs scaled back its "overweight" exposure to emerging market assets Thursday, amid rising trade tensions between the U.S. and China.
NYSE:VWO May 16, 2019 1:12pm

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