The S&P 500 Index (SNPINDEX:^GSPC) closed down 20 points, or 0.62%, on July 24, a second-straight sell-off to close the week lower than it started for the first time in almost a month. Today's decline was driven by worries that tensions between the U.S. and China are rising, as the White House doubles down on its "tough on China" platform.
This uncertainty compounds ongoing economic worries as the coronavirus pandemic worsens, sending more investors into gold as a hedge. Gold futures moved higher, surpassing the all-time high reached almost nine years ago.
Today's stock sell-off was broad, with well over 300 of the slightly more than 500 stocks in the S&P 500 falling today. Most notably was Intel (NASDAQ:INTC), with shares down around 16% on the day, while rival Advanced Micro Devices (NASDAQ:AMD) shares surged 16% higher after Intel announced its next generation of advanced chips would be delayed.
U.S.-China tensions escalate
Earlier this week, the U.S. ordered China to close its Houston, Texas consulate on accusations of economic espionage and visa fraud. China retaliated today, ordering the U.S. to close its Consulate in Chengdu, China, calling it a "necessary" response.
President Donald Trump has made China a major and regular target since early in his administration, citing intellectual property theft and illegal trade practices by the country. More recently, Trump has placed much of the blame for the coronavirus pandemic on that country.
The timing of the ordered closure of the Houston consulate comes as U.S. cases of coronavirus surge higher, threatening to derail an economic recovery that is already showing signs of weakening.
Gold prices continue strong rally, break record price
The combination of growing economic worries as the coronavirus pandemic accelerates, and the threat of an intensifying dispute between the U.S. and China has gold prices moving higher. In general terms, 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's proven to be the case in recent years:
After losing 37% of its value from the 2011 peak to the beginning of 2016, gold prices have surged 70% and are within striking distance of surpassing the SPDR S&P 500 Index ETF Trust (NYSEMKT:SPY) in total returns since. Some investors are betting that gold will hold up better than stocks, as long as the economic and political uncertainty remains so high.
Intel delay is great news for AMD
Intel reported second quarter results today that beat expectations, with sales up 20% and adjusted earnings per share up 16%. Despite strong growth, semiconductor manufacturer Intel disappointed investors when it said that its next generation of microprocessors would be delayed at least six months.
This announcement is a huge gift to competitor AMD, Intel's smaller rival that has already brought the 7nm scale chips to the market, to rave reviews and strong sales. While Intel is more diversified than AMD, its microprocessor business is still very important, and investors fear it may take years for Intel to make up the lost ground.
Joining Intel in the sell-off was semiconductor equipment company KLA Corp (NASDAQ:KLAC), with shares down almost 8% at the close.
Coming next week: Industry giants set to report
Next week is a huge week for tech earnings, with Apple (NASDAQ:AAPL), Alphabet (NASDAQ:GOOG)(NASDAQ:GOOGL), and Facebook (NASDAQ:FB) all set to announce second quarter results. Electronic payments giants Visa (NYSE:V), Mastercard (NYSE:MA) and PayPal Holding (NASDAQ:PYPL) are also scheduled to announce their quarterly results. Consumer goods giant Procter & Gamble (NYSE:PG) is also set to report next week.
Add it all up, and next week offers a pivotal look at earnings from some of the biggest companies in the U.S. Tune back in next week for a closer look.