By Johann M Cherian, Sanchayaita Roy and Saeed Azhar
(Reuters) -Wall Street’s main indexes were down on Monday as investors await inflation data this week and chip companies seesawed after agreeing to share a portion of revenue from China sales with the U.S. under a trade policy shift from the Trump administration.
Nvidia was flat after reversing premarket losses, and Advanced Micro Devices was up 0.5% in volatile trading. A U.S. official told Reuters the semiconductor majors had agreed to give the United States government 15% of revenue from sales of their advanced chips to China.
Analysts said the levy could hit the chipmakers’ margins and set a precedent for Washington to tax critical U.S. exports, potentially extending beyond semiconductors.
“A lot of people are not sure what to make of that because this is the first time in history that it’s ever happened where an administration wants a percentage of the profits from a publicly traded company,” said Michael Matousek, head trader at U.S. Global Investors.
Enabling semiconductor sales to China was an integral issue in the agreement Washington and Beijing signed this year, which expires on Tuesday. U.S. President Donald Trump lauded China’s cooperation in talks at a White House press conference on Monday.
At 2:01 p.m. ET (1801 GMT), the Dow Jones Industrial Average fell 176.88 points, or 0.40%, to 43,998.91, the S&P 500 lost 5.60 points, or 0.09%, to 6,383.93, and the Nasdaq Composite lost 12.87 points, or 0.06%, to 21,437.15.
Traders took a step back after the S&P 500 and the Nasdaq last week logged their strongest weekly performances in more than a month. On Monday, the tech-heavy Nasdaq was on track for its third consecutive record closing high, if gains hold.
Investors expect the recent shakeup at the U.S. Federal Reserve and signs of labor market weakness could nudge the central bank into adopting a dovish monetary policy stance later this year, fueling much of the optimism.
July’s consumer inflation report is due on Tuesday, and investors anticipate that the Fed will lower borrowing costs by about 60 basis points by December, according to data compiled by LSEG.
“Markets are on rate watch, so anything inflation-related will move markets this week,” said Jamie Cox, managing partner at Harris Financial Group. “It’s all about three rate cuts versus two at this point.”
Citigroup and UBS Global Research became the latest brokerages to raise their year-end targets for the benchmark S&P 500.
Micron Technology raised its forecast for fourth-quarter revenue and adjusted profit, boosting its shares 3%.
Intel was up 3.5% after a report said CEO Lip-Bu Tan was expected to visit the White House. Trump had called for his removal last week.
TKO jumped 8.5% after Paramount bought the rights from the live entertainment company to exclusively distribute UFC events for the next seven years in a deal valued at around $7.7 billion.
Trump is expected to meet Russia’s President Vladimir Putin on Friday to try and negotiate an end to Russia’s war on Ukraine.
Declining issues outnumbered advancers by a 1.11-to-1 ratio on the New York Stock Exchange. There were 203 new highs and 89 new lows on the NYSE.
On the Nasdaq, declining issues outnumbered advancers by a 1.12-to-1 ratio.
The S&P 500 posted 14 new 52-week highs and 15 new lows, while the Nasdaq Composite recorded 65 new highs and 98 new lows.
(Reporting by Johann M Cherian and Sanchayaita Roy in Bengaluru; Editing by Pooja Desai and Rod Nickel)
