What Happened?
A number of stocks fell in the afternoon session after China announced new export controls on the critical minerals. Beijing's Commerce Ministry stated that foreign suppliers now need government approval to export products containing certain rare-earth materials. These materials are essential for producing high-tech goods, including computer chips, electric vehicles, and defense technology. Analysts view the move as a strategic assertion of China's dominance in the global rare earth supply chain, particularly amid ongoing trade tensions and ahead of an anticipated meeting between the US and Chinese presidents. The new policies are expected to tighten global supply chains, potentially causing licensing delays and cost increases for manufacturers in key strategic sectors. Also, investors paused a record-setting rally amid uncertainty from the ongoing U.S. government shutdown.
The S&P 500 and Nasdaq pulled back from all-time highs as the shutdown entered its second week, creating a data vacuum for investors. The political impasse has halted the release of vital economic indicators, including key reports on jobs and inflation. Without this crucial information, it becomes more difficult for the Federal Reserve and market participants to accurately assess the nation's economic health. This uncertainty has prompted traders to take profits following a prolonged period of gains. In the absence of official data, investors are paying close attention to upcoming speeches from Fed officials for any guidance on future monetary policy.
In addition, Jamie Dimon raised concerns about a market correction. He added, "I would give it a higher probability than I think is probably priced in the market and by others, so if the market is pricing in 10%, I would ... say it's more like 30%." Dimon's remarks are closely watched, given his influence as head of one of the nation's largest banks.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks.
Among others, the following stocks were impacted:
- Processors and Graphics Chips company Allegro MicroSystems (NASDAQ:ALGM) fell 3.3%. Is now the time to buy Allegro MicroSystems? Access our full analysis report here, it’s free for active Edge members.
- Semiconductor Manufacturing company Entegris (NASDAQ:ENTG) fell 0.7%. Is now the time to buy Entegris? Access our full analysis report here, it’s free for active Edge members.
- Processors and Graphics Chips company Penguin Solutions (NASDAQ:PENG) fell 3.8%. Is now the time to buy Penguin Solutions? Access our full analysis report here, it’s free for active Edge members.
- Analog Semiconductors company Skyworks Solutions (NASDAQ:SWKS) fell 3.8%. Is now the time to buy Skyworks Solutions? Access our full analysis report here, it’s free for active Edge members.
- Analog Semiconductors company Impinj (NASDAQ:PI) fell 3.3%. Is now the time to buy Impinj? Access our full analysis report here, it’s free for active Edge members.
Zooming In On Skyworks Solutions (SWKS)
Skyworks Solutions’s shares are somewhat volatile and have had 12 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 8 months ago when the stock dropped 30% on the news that the company reported underwhelming fourth-quarter results and announced it lost some of its business with its largest customer, Apple. Sales came in roughly in line with Wall Street expectations but declined 11.1% year-on-year. SWKS confirmed a significant loss of business in the upcoming iPhone 17 cycle, as management disclosed that the company will be dual-sourced for the iPhone 17 DRX socket, which translates to a significant share loss in Apple's next-generation devices.
On the other hand, inventory levels improved. In addition, its revenue guidance for next quarter came in much higher than Wall Street's estimates.
Overall, we think this was still a disappointing quarter, with markets likely worried about weak growth and lost business.
Skyworks Solutions is down 16.7% since the beginning of the year, and at $73.68 per share, it is trading 25.7% below its 52-week high of $99.15 from October 2024. Investors who bought $1,000 worth of Skyworks Solutions’s shares 5 years ago would now be looking at an investment worth $477.57.
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