Why Are Stock Prices Falling? The Semiconductor and Storage Sector Collapse Explained

The last trading day of the year brought significant headwinds to U.S. equity markets, with major benchmarks retreating across the board. The S&P 500 dipped -0.33%, while the Dow Jones Industrial Average slid -0.35% and the Nasdaq 100 fell -0.34%. March futures contracts mirrored this weakness, with E-mini S&P futures down -0.35% and E-mini Nasdaq futures sliding -0.38%. All three major indexes are now trading at 1-week to 1.5-week lows, signaling a shift in market momentum as the year draws to a close.

Semiconductor and Data Storage Companies Drive Market Decline

The primary culprit behind stock prices falling today is widespread pressure on chip manufacturers and data storage companies. Micron Technology leads the losses in the Nasdaq 100, declining more than -1%, while a cascade of semiconductor names follow suit. KLA Corp, Western Digital, Marvell Technology, Qualcomm, and Broadcom have all retreated more than -1%. These heavyweight tech components are dragging down the broader market indices, with chip stocks representing one of the most significant headwinds.

Mining Sector Weakness Compounds Market Pressure

Adding fuel to the fire, mining stocks are experiencing substantial declines as precious metals retreat sharply. Gold prices have fallen to 2.5-week lows, while silver prices have plunged more than -7%. This weakness has rippled through mining equities, with Newmont and Barrick Mining both down more than -1%. Freeport-McMoRan has declined -0.69%, and Hecla Mining is down -0.46%.

The Fed Policy and Interest Rate Factor

A key driver pushing stock prices down is the unexpected strength in the labor market, which has hawkish implications for Federal Reserve policy. U.S. weekly initial unemployment claims fell -16,000 to 199,000, marking a 1-month low and surprising economists who anticipated claims would rise to 218,000. This stronger-than-expected labor report signals a resilient job market, causing the 10-year Treasury yield to climb +2 basis points to 4.14% after the data release.

Higher bond yields typically create headwinds for equities, as investors reassess the risk-reward profile of stocks relative to safer fixed-income alternatives. Markets are now pricing in only a 15% probability of a -25 basis point rate cut at the FOMC’s January 27-28 meeting, suggesting limited expectations for near-term monetary accommodation.

Mixed Global Signals: China’s Economic Strength vs. Market Caution

Despite the domestic weakness, there is some supportive news from abroad. China’s December manufacturing PMI unexpectedly expanded to 50.1, up +0.9 points and marking the fastest pace of expansion in 9 months. The non-manufacturing PMI also surprised to the upside at 50.2, climbing +0.7 points versus expectations of 49.6. This economic data suggests Chinese growth may be stabilizing, providing some support to global growth prospects.

However, this positive economic backdrop has not been enough to offset the concern over higher rates and sector-specific weakness. Trading volumes remained well below normal as markets in Germany and Japan were closed for the New Year’s holiday, limiting liquidity and potentially exacerbating the selloff.

Individual Stock Winners and Losers

Beyond the sector rotation, individual company developments shaped trading. Corcept Therapeutics plummeted more than -51% after the FDA rejected its relacorliant drug, citing insufficient effectiveness evidence for treating hypertension secondary to hypercortisolism. GlobalFoundries slid more than -2% following a Wedbush downgrade from outperform to neutral.

On the positive side, Vanda Pharmaceuticals surged more than +31% after FDA approval of its Nereus drug for motion-induced nausea prevention. Terawulf climbed more than +5% after a Keefe, Bruyette & Woods upgrade to outperform with a $24 price target. Nike advanced more than +2% to lead Dow gainers on insider buying signals, with CEO Hill purchasing approximately $1 million in shares. Nvidia managed a modest +0.43% gain amid reports of increased production discussions with TSMC for its H200 AI chips.

Seasonal Tailwinds and Forward Outlook

Despite today’s decline, historical data provides some comfort. According to Citadel Securities, since 1928 the S&P 500 has risen 75% of the time during the final two weeks of December, averaging a +1.3% gain. As this holiday-shortened week progresses, market focus will shift to economic data releases, with December manufacturing PMI expected to remain stable at 51.8. The divergence between stronger labor data and weakness in cyclical stocks like semiconductors and mining reflects broader uncertainty about the path of monetary policy and growth in 2026.