Stocks end lower as tech bleeds, Fed policymaker calls for ’modestly higher’ rates

Wall Street closed in the red on Thursday, dragged down by the technology sector as semiconductor names slid on an increased capex guidance from the world’s largest contract chipmaker. Sentiment also took a hit after a regional Federal Reserve president called for “modestly higher” interest rates.

Countering the decline in tech was a surge in consumer staple and healthcare stocks, with the latter helped by a post-earnings climb in insurance giant UnitedHealth.

Market participants also digested economic data that pointed to strength in U.S. consumer spending and the labor market, while keeping an eye on the tense situation in the Middle East. Quarterly earnings from Netflix were set to arrive after the closing bell.

The benchmark S&P 500 index shed 0.5% to end at 7,533.61 points, while the tech-heavy NASDAQ Composite slumped 1.5% to settle at 25,881.95 points. The blue-chip Dow Jones Industrial Average fell 0.2% to conclude at 52,553.62 points, having erased a gain of as much as 0.5%.
TSMC’s blowout quarter does little to quell concerns
Chipmaking behemoth Taiwan Semiconductor Manufacturing (TSMC) posted a staggering 77% jump in quarterly net profit to T$706.6 billion ($22 billion), comfortably beating consensus estimates.

As the primary manufacturer of advanced processors for Nvidia and Apple, TSMC’s blockbuster results served as the clearest indicator yet that global artificial intelligence infrastructure investment remained exceptionally robust.
“If investors were looking for cracks in the AI growth theme in TSMC’s quarterly results they’d struggle to find any after the chipmaker delivered another huge surge in profit. Like first-time park runners, analysts are struggling to keep up with the pace of TSMC’s growth. Comments from chief executive CC Wei suggest the current bumper demand can last until the end of this decade,” Dan Coatsworth, head of markets at AJ Bell, said. 

However, TSMC’s U.S.-listed shares finished 2.3% lower. 

The firm’s stellar report failed to calm investor jitters about the high flying AI-trade, echoing a similar trend from the previous day in the wake of Dutch chip major ASML’s strong results. TSMC raised its capital expenditure guidance for 2026 to a whopping $60 billion to $64 billion. It also separately unveiled an additional $100 billion investment in Arizona, extending a U.S. commitment that had already reshaped its global footprint.

“The relatively muted market reaction likely reflects the more than doubling in TSMC’s share price over the last 12 months but also a couple of elements which may have given investors pause for thought,” Coatsworth said. 

“TSMC is expanding outside of Taiwan, including in the U.S., and this put some pressure on margins. Separately, the company has once again increased its projections for capital spending for the year. While the case for boosting capacity is clear at a time when there is a large gap between supply and demand, shareholders will want TSMC to retain some discipline even as it looks to meet orders piling up,” he added. 
Upcoming tech earnings represent a big test for markets
A furious rally in the AI trade earlier this year played a key role in helping Wall Street shake off the Middle East conflict and return to record levels. But a bout of profit-taking has hit the space since last month, amid rising concerns over massive capital sending on the technology and soaring prices for products such as memory chips that power AI processing.

Eyes are now on the earnings season, especially on major chip manufacturers and mega-cap firms such as the Magnificent Seven. Investors will receive quarterly reports from Alphabet, Intel, IBM, Texas Instruments, and Tesla next week, followed by Microsoft, Meta, Amazon, Arm, Qualcomm, and Apple the week after.

Capital spending plans of these companies will be closely watched, especially on the AI buildout. It remains to be seen whether their performance will also continue the early trend of muted stock reactions to outstanding results.

Netflix will grab attention on Thursday, with the streaming giant scheduled to report earnings after hours. The stock has been under pressure this year amid struggles with user engagement and doubts about the company’s growth strategy. Netflix’s nascent advertising business is being especially scrutinized.

UnitedHealth, Abbott buoy healthcare stocks
A more than 2% surge in the S&P 500 Healthcare sector on Thursday helped cap the broader market’s losses.

The blue-chip Dow got a lift from UnitedHealth, shares of which climbed 1.2%. The number one U.S. managed care player delivered a quarterly earnings report that far exceeded analyst expectations on virtually every metric. In particular, the company’s dramatic improvement in the medical cost ratio – a key metric that measures the percentage of premiums spent on medical care – cheered investors.