Semiconductor stocks lead S&P 500 to the downside

Yahoo Finance Live anchors discuss semiconductor stock performance.

Video transcript

JULIE HYMAN: Welcome back. We are seeing markets back in the red after bouncing around a bit. All three major averages now down about 6/10 of 1%. And I keep focusing on semiconductors here after Micron came out with a forecast that was well below what analysts were looking for and talked about cutting capacity back to deal with coming slowdown in demand.

And of the 10 worst performers in the S&P 500, pretty much all of them are semiconductor-related, from Micron itself to Lam Research to Western Digital to On Semiconductor. So the semiconductor equipment makers like KLA Tencor-- or I guess, it's just KLA now-- and like Applied Materials are also being hit today. You see there Lam as well is down some 6%.

So, to the sort of bigger picture that we've been talking about-- Dan Ives saying it, Michael Arone saying it-- we are going to need to have more downward revisions. That's been one of the big ongoing themes we've been hearing all week from both people who cover specific companies and sectors and people who cover the market as a whole.

BRAD SMITH: Yeah, and on the demand side, we need some softening in demand as well to actually meet up with the supply because the capacity is simply not there yet to meet the demand that's out there. We spoke with Qualcomm CFO earlier this week. They're expecting chip supply and demand to balance out later this year. It's at what capacity that it's at.

And even as we're continuing to think about some of the broader sector moves going into and starting the second half of this year as well, in today's activity, you've got materials and energy actually being the biggest decliners as of right now. And looking at some of the energy names, across the board right now, whether it's Chevron, whether it's ExxonMobil, oil and gas is getting hit hard here. Occidental as well, Warren Buffett's favorite child there, clearly, most recently-- don't tell Apple-- it's down by about 2.7% right now.

BRIAN SOZZI: Yeah, one nugget, I think, that's getting lost in this Micron results, to Dan's point, this is not just a Micron problem. It's a problem across the chip industry. That's why you're seeing the likes of a Lam Research down. It's that you could just see more warnings from the space because now you're seeing weakness in cloud services. A little thing that was overlooked in Micron, Micron called out weakness in cloud services. So what does that mean for Microsoft results? What does it mean for Google results? Do we start to see now weakness in those larger cap tech plays?

JULIE HYMAN: Yeah, I think we'll have to wait and see.

BRAD SMITH: It's a data center exposure, too, that each of those cloud services names, they're going to have to halve in order to continue to see people and companies buy in to the chips that they need, not just for individuals out there and for the handsets, as we were talking about earlier, and personal devices, but what they need to actually make a broader service run.

BRIAN SOZZI: Well, surely, Bed, Bath & Beyond and Kohl's, they don't need any more cloud capacity, given those quarters.

JULIE HYMAN: No, they don't.

BRIAN SOZZI: Just stop investing, guys. Please, just pull back.

JULIE HYMAN: Just to go back to energy for one quick second here, materials and energy are the two worst performing groups in the S&P 500 today. And as I look across the commodity complex, crude is actually higher. And the energy complex is higher. But everything else is lower-- aluminum, copper, gold, nickel, silver, cattle, coffee, corn. Actually, cattle is higher, but coffee, corn, cotton, soybeans. All the ags, all the metals are trading lower today.

BRIAN SOZZI: I'm not laughing there. I was just--

JULIE HYMAN: Yeah, what are you laughing at?

BRIAN SOZZI: The photo behind you.

JULIE HYMAN: Oh, no.

[LAUGHTER]