US STOCKS-Wall St edges lower as chips fall; markets assess big bank earnings

By Tharuniyaa Lakshmi and Purvi Agarwal

Oct 13 (Reuters) - The S&P 500 and the Nasdaq inched lower on Tuesday as chip stocks came under selling pressure while investors parsed a mixed bag of quarterly results, including those from big US banks.

Healthcare .SPXHC was the biggest drag on the S&P 500, with Johnson & Johnson JNJ.N dropping 6.8% despite topping profit estimates.

Information technology stocks .SPLRCT were flat in choppy trading. Some chip stocks sold off — with memory chipmaker Micron Technology MU.O losing 4.6% and data storage companies Western Digital WDC.O and Seagate STX.O slipping between 1% and 2%. The decline was countered by Apple AAPL.O hitting a record high and Microsoft MSFT.O rising 0.9%.

Sentiment turned after Broadcom AVGO.O CEO Hock ‌Tan likened some of the investment flow into the sector to "casino gambling" on Monday. Reports of technological advances by China's CXMT, meanwhile, raised fears of rising competition.

AI technology weakness was creating unease in the market, said Peter Cardillo, chief market economist at Spartan Capital Securities.

A 2% rise in Meta META.O propped up the communication services sector .SPLRCL, limiting losses on the S&P 500.

At 12:23 p.m. ET, the Dow Jones Industrial Average .DJI fell 173.96 points, or 0.34%, to 51,676.77, the S&P 500 .SPX lost 9.38 points, or 0.12%, to 7,798.04 and the Nasdaq Composite .IXIC lost 38.24 points, or 0.14%, to 27,207.66.

Caterpillar CAT.N and Honeywell HON.O were the biggest drags on the Dow.

Investors also read through a mixed bag of earnings from big banks. Citigroup C.N dipped 3.4% but Goldman Sachs GS.N rose about 0.5% after both topped profit estimates.

Wells Fargo WFC.N fell 1.5% after its net interest income missed estimates, while JPMorgan Chase JPM.N swung between gains and losses following a rare profit miss.

The flattening yield curve — where longer-term returns rise faster than shorter-term, in a sign of rising credit risks — weighed on banks, Kathleen Brooks, research director at XTB, said. "Investors tend to price this in ahead of time, which is why US banks with large retail units like JPMorgan and Citi are struggling."

Hopes of a strong earnings season had been propping up the broader market amid geopolitical tension, surging bond yields and energy-price-led inflation worries.

"Until we get into the full swing of earnings, we'll still be subject to uneven market performance," Cardillo said.

Elevated crude prices have fueled inflation concerns and pushed bond yields to multi-year highs, but recent US economic data pointing to weaker job growth and lower-than-expected inflation rise have curbed bets on imminent interest rate hikes.

This has brought the September reading of consumer and producer prices and retail numbers, slated for this week, under greater scrutiny. Comments from regional Fed presidents Thomas Barkin and Susan Collins will be in focus later in the day.

Among others, Bumble BMBL.O jumped 56% to a year-high after the dating-app operator agreed to go private in a $1.3 billion deal.

Domino's Pizza DPZ.O lost 3.8% after scaling back its full-year sales outlook.

Declining issues outnumbered advancers by a 1.22-to-1 ratio on the NYSE and by a 1.9-to-1 ratio on the Nasdaq.

The S&P 500 posted 14 new 52-week highs and 5 new lows while the Nasdaq Composite recorded 33 new highs and 344 new lows.