Good morning. Yesterday’s letter praised Federal Reserve chair Jay Powell’s confidence in the economic expansion. Our timing was perfect as usual. Just a few hours after we published, a particularly ugly manufacturing ISM report landed. The employment subcomponent of the index was the weakest bit. A rough day on markets followed, especially for semiconductor stocks (see below), which had gotten a scare from some poor earnings reports. Things got no better when, after the markets closed, Amazon reported a solid quarter but an underwhelming forecast. Worse, Intel’s earnings report was a horror. Apple’s numbers were fine, thank goodness. It’s a lot to process. Please email with a tidy interpretation: [email protected] and [email protected].

Semiconductor companies

Back in June, Unhedged wrote about how a third big support for the rally in the S&P 500 — after the Big Tech platforms and AI chipmaker Nvidia — was other semiconductor companies. Recently the picture has become less rosy, though. Stock volatility has risen sharply across the sector, and there have been some poor quarterly results.

Just yesterday, shares of Arm and Qualcomm fell 16 per cent and 15 per cent, respectively, after providing third-quarter outlooks implying that the mobile device market is only treading water. Intel, which reported after yesterday’s close, said it expected to make a loss in the third quarter and was cutting both its dividend and thousands of jobs. The company mentioned “challenging” second-half trends and the impact of overcapacity. Its shares fell 19 per cent in late trading (after falling 5 per cent during the day).