S&P 500 -1.02%, Nasdaq -1.57%: Midday Chips Drag the Tape Lower

It's 12:40 in New York, with the S&P 500 at 7,725.96, down 1.02%, and the Nasdaq at 26,777.32, down 1.57%. Against my 00:10 note, the S&P 500 has slipped another 0.19 percentage points and the Nasdaq another 0.44. The slide hasn't eased, and it's tilting toward the Nasdaq. That's this edition's story.

A hot CPI and a fifth straight chip slide

I see two threads. One is September consumer prices accelerating: Treasuries sold off, the 2-year yield jumped 13.4bp, and the chatter about another Fed hike at month-end is back. The other is earnings season. Profits grew, but expectations were simply too high, and the semiconductor index is down five sessions running. That's why the Nasdaq hurts more than the S&P 500.

Sector flow tells the same story: energy and staples hold up, clean energy and semiconductors lag. The dollar index and USD/KRW both easing says this isn't a rush into the dollar. The last Korean session (10/14 close) had KOSPI -0.44% and KOSDAQ -1.57%, and that finished weakness looks like it's carrying into the US tape.

My disclosed holdings: Microsoft +35.7%, Coca-Cola Co +5.3%, Procter & Gamble +4.3%, HD Hyundai Heavy +0.5%. Those are unrealized gains, not today's moves. I'll only note that the defensive names are sitting still on a day staples are firm.

With 3 hours 20 minutes to the close, I'm watching two things: whether the semiconductor index breaks its five-day slide, and where rate expectations settle after the CPI. Whether the Nasdaq's loss stops at this morning's level or widens will set the tone of today's session.