the S&P 500 Index (SNPINDEX: ^ SPX) it closed 20 points, or 0.62%, on July 24, a second consecutive selloff to close the week lower than it started for the first time in nearly a month. Today’s decline was fueled by concerns that tensions between the United States and China are escalating as the White House doubles on its “tough on China” platform.
This uncertainty exacerbates current economic concerns as the coronavirus pandemic worsens, sending more investors to gold as cover. Gold futures moved higher, surpassing the all-time high reached nearly nine years ago.
Today’s mass sell-off was broad, with more than 300 of the slightly more than 500 shares in the S&P 500 falling today. The most notable was Intel (NASDAQ: INTC), with shares below 16% on the day, while rival Advanced micro devices (NASDAQ: AMD) Shares were up 16% more after Intel announced that its next generation of advanced chips would be delayed.
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Tensions between the United States and China increase
Earlier this week, the United States ordered China to close its Houston, Texas consulate on charges of economic espionage and visa fraud. China retaliated today, ordering the United States to close its Consulate in Chengdu, China, calling it a “necessary” response.
President Donald Trump has made China an important and regular target since the beginning of his administration, citing the theft of intellectual property and illegal business practices by the country. More recently, Trump has attributed much of the blame for the coronavirus pandemic in that country.
The time for the orderly closure of the Houston consulate comes as coronavirus cases in the United States rise, threatening to derail an economic recovery that already shows signs of weakening.
Gold prices continue strong rebound, break record price
The combination of mounting economic concerns as the coronavirus pandemic accelerates, and the threat of an increasingly intense dispute between the US and China is driving gold prices up. Generally speaking, gold tends to underperform as an investment during strong economic periods. But during recessions and periods of uncertainty, the precious metal tends to outperform stocks. That has been the case in recent years:
YCharts US Dollar Gold Price Data
After losing 37% of its value from the 2011 peak to the beginning of 2016, gold prices have risen 70% and are a surprising distance from exceeding the SPDR S&P 500 Index ETF Trust (NYSEMKT: SPY) in total returns from. Some investors bet that gold will hold better than stocks as long as economic and political uncertainty remains as high.
Intel’s delay is great news for AMD
Intel today reported second-quarter results that exceeded expectations, with sales increasing 20% and adjusted earnings per share 16%. Despite strong growth, semiconductor maker Intel disappointed investors when it said its next generation of microprocessors would be delayed by at least six months.
This announcement is a great gift to competitor AMD, Intel’s smallest rival that has already brought 7nm-scale chips to market, with rave reviews and strong sales. While Intel is more diversified than AMD, its microprocessor business is still very important, and investors fear that it may take years for Intel to regain lost ground.
Joining Intel in the bulk sale was the semiconductor equipment company KLA Corp (NASDAQ: KLAC), with a drop of almost 8% at the close.
Coming next week: industry giants are ready to report
Next week is a great week for tech gains, with Apple (NASDAQ: AAPL), Alphabet (NASDAQ: GOOG)(NASDAQ: GOOGL)and Facebook (NASDAQ: FB) all set to announce second quarter results. Electronic payment giants Visa (NYSE: V), MasterCard (NYSE: MA) and PayPal Holding (NASDAQ: PYPL) They are also slated to announce their quarterly results. Consumer goods giant Procter & Gamble (NYSE: PG) It is also set to report next week.
Add it all up, and next week offers a fundamental insight into the earnings of some of the biggest companies in the US Tune in next week for a closer look.
