Wall Street Rally Fizzles on Profit Warning From Chip Makers

Risk aversion resurfaced across Europe and the US on Friday as a profit-warning out of the semi-conductor sector coupled with fresh selling pressure on the Turkish lira set Wall Street’s major market averages up to open with modest losses. While losses have been mitigated by gains in the energy complex, the technology sector is likely to weigh on Wall Street following disappointing revenue forecasts from Applied Materials (AMAT) and Nvidia (NVDA).

Focus shifted back to overnight Turkey as the lack of any meaningful measures to restore confidence in the lira/banking system coupled with an upcoming week-long holiday in the country next week encouraged profit-taking in the currency from recent gains.

In addition to Turkey, investors were also unnerved by a Pentagon report that warned that China’s long-range bombers were “likely training for strikes” against the US and its allies, and could be preparing for a showdown with the US over Taiwan.

With the risk-off trade back on, Treasury yields were roughly a basis point lower, gold was inching higher, and the dollar was weaker against safe-haven currencies like the Japanese yen and Swiss franc.

For Friday, Wall Street will get the first look at the University of Michigan consumer sentiment index for August as well as July leading economic indicators, both at 10 am ET. The weekly Baker Hughes rig count will be released at 1:00 pm ET.