STORY: Wall Street’s main indexes closed lower on Tuesday, as chip stocks tumbled and the energy sector slid along with oil prices.
The Dow and S&P 500 each shed three-quarters of a percent, and the Nasdaq dropped one percent.
The energy index finished down 3% for its biggest one-day percentage decline since early October 2023 as crude prices fell on weaker demand expectations.
Still, Cole Smead, chief executive officer and portfolio manager at Smead Capital Management, sees the sector as a stronghold.
“If you look at CapEx as a percentage of operating cash flow, the history of the energy businesses is they always drill too much. It was kind of the old ‘drill baby drill,’ for lack of a better term. And what they’ve transformed into is now they’re investing vehicles. They are companies that produce high levels of free cash flow. They don’t drill like they did in the past. And when you track drilling, drilling was what they call CapEx. So when you track CapEx as a percentage of operating cash flow, you’ll find it’s gone to very low levels. And what that’s done is it unleashes the free cash flow.”
In other movers, chip-equipment-maker ASML Holdings’ U.S.-listed shares tumbled 16% after reporting downbeat expectations for 2025 sales. That helped drag down the Philadelphia semiconductor index 5.3% for its biggest one-day drop since early September.
And fresh from a record-high close on Monday, shares of Nvidia fell more than 4.5% after a media report said the Biden administration is considering capping AI chip exports by U.S. companies.
Switching to retail, shares of Walgreens Boots Alliance rallied nearly 16% after the pharmacy company narrowly beat Wall Street’s lowered estimates for fourth-quarter adjusted profit and announced plans to shut 1,200 stores to cut costs.
