Wall Street indexes lose ground as chip, oil stocks drop

By Sinéad Carew and Lisa Pauline Mattackal

(Reuters) -Wall Street's major stock indexes slipped on Tuesday, with the Nasdaq leading declines as chip stocks sold off on fears of weak demand while energy shares fell with oil prices.

Earnings reports were also a mixed bag with mostly positive reactions to financial services reports contrasting with a 7% slump in shares of UnitedHealth after the health insurer forecast 2025 profit below Wall Street estimates.

The biggest drag on the Nasdaq came from Nvidia, the leading chip maker for artificial intelligence. Its shares were down about 5% after a record-high close on Monday, following a media report that the Biden administration is considering capping AI chip exports by U.S. companies.

Chip stocks lost ground broadly after results of chip-equipment-maker ASML Holdings showed downbeat expectations for 2025 sales. ASML's U.S.-listed shares dropped 17%, while the Philadelphia semiconductor index fell 4.9%.

"The fact ASML slowed guidance means demand for all kind of chips, with the exception of chips for generative AI, is rather weak," said Irene Tunkel, chief us equity strategist at BCA research. "Weak demand for chips indicates lower global growth. It means global demand for pretty much everything is weak,"

Tunkel noted that defensive sectors were outperforming as investors worried about global economic growth.

Also, the energy industry index fell 2.5%, as crude prices fell on weaker demand expectations after a media report suggested Israel would not strike Iranian oil targets [O/R].

Both the Dow and the S&P 500 registered record closing highs in the previous session but after opening higher on Tuesday they failed to maintain their gains.

At 2:06 p.m. EDT the Dow Jones Industrial Average fell 234.68 points, or 0.54%, to 42,831.30, the S&P 500 lost 29.57 points, or 0.50%, to 5,830.28 and the Nasdaq Composite lost 151.01 points, or 0.82%, to 18,351.84.

Ryan Detrick, chief market strategist at the Carson Group, said investors were likely booking some profits after a thin trading session on Monday, when bond markets were closed for a holiday, as they looked ahead to key economic data and a continued deluge of earnings over the next few weeks.

In the financial sector, Bank of America rose 1.4% following a third-quarter profit beat, while Charles Schwab soared 6.9% after beating estimates. However, Citigroup shares were down almost 5% after its results.

The broader Banks index rose 0.9% and was trading at its highest level in more than two years, while an index of regional banks gained 2.2%.

Bucking the trend of tech stock declines, Apple was up about 1% after earlier touching a record high.

Also in individual stocks, Walgreens Boots Alliance soared 12% after narrowly beating Wall Street's lowered estimates for fourth-quarter adjusted profit and announcing plans to shut 1,200 stores to cut costs.

Investors will watch in coming days for the next batch of earnings as well as key economic data, including monthly retail sales and industrial production figures.

Earlier on Tuesday, San Francisco Fed President Mary Daly said that even after September's interest-rate cut, policymakers were still working to bring inflationary pressures down.

Traders are pricing in a roughly 90% chance the Fed will cut interest rates by 25 basis points in November, according to CME's FedWatch.

Advancing issues outnumbered decliners by a 1.48-to-1 ratio on the NYSE where there were 466 new highs and 32 new lows.

On the Nasdaq, 2,345 stocks rose and 1,863 fell as advancing issues outnumbered decliners by a 1.26-to-1 ratio. The S&P 500 posted 112 new 52-week highs and no new lows while the Nasdaq Composite recorded 166 new highs and 66 new lows.

(Reporting by Sinead Carew in New York, Lisa Mattackal and Purvi Agarwal in Bengaluru; Editing by Pooja Desai and Matthew Lewis)