The S&P 500 Index and Nasdaq Composite slipped lower on Wednesday as investors rotated out of semiconductor names and into more rate sensitive names. This, in turn, lead the Dow Jones Industrial Average to add to its explosive rally seen in the previous session, rising over 200 points.

Here's how the market settled on Wednesday:

S&P 500 Index (SPY  ): -1.39% or -78.93 points to 5,588.27

Dow Jones Industrial Average (DIA  ): +0.59% or +243.60 points to 41,198.08

Nasdaq Composite Index (QQQ  ): -2.77% or -512.42 points to 17,996.92

Chips Under Pressure

Global semiconductor stocks, including Nvidia (NVDA  ), AMD (AMD  ) and TSMC (TSMC  ), fell on Wednesday amid concerns of increased export restrictions and geopolitical tensions following reports out of Washington and comments from former U.S. President Donald Trump for the sector. The VanEck Semiconductor ETF (SMH  ) also declined throughout the session.

Bloomberg News reported Wednesday that the Biden administration is considering a broad rule to ut controls on foreign-made products that use American technology in effect to curb chipmaker exports to China. Separately, Trump said in an interview with Bloomberg Businessweekpublished Tusay that "Taiwan should pay [the United States] for defense," and claimed that the country "doesn't give us anything."

FedWatch:

Federal Reserve Governor Christopher Waller on Wednesday echoed recent remarks from Fed Chair Jerome Powell that the U.S. economy is near a point where interest rate cuts may be needed to continue stable growth.

"While I don't believe we have reached our final destination, I do believe we are getting closer to the time when a cut in the policy rate is warranted," Waller said in a speech in Kansas City, adding that current labor market conditions are in a "sweet spot," with job growth is steady while wage growth is decreasing.

Separately, the Fed's Beige Book released Wednesday afternoon showed economic growth has slowed throughout the country as consumer trends shift in response to rising prices. The conditions report noted that "almost every District mentioned retailers discounting items or price-sensitive consumers only purchasing essentials, trading down in quality, buying fewer items, or shopping around for the best deals."

On the Earnings Front:

ASML (ASML  ) reported second-quarter earnings that topped Wall Street expectations on Wednesday, boosted by broader momentum from the emerging artificial intelligence sector. Despite the strong earnings, shares of the chipmaker fell alongside its peers following the Bloomberg report of more potential exporting rules on the sector; ASML sources nearly 50% of its sales from China, making it one of the more vulnerable companies to export regulations.

"We see 2024 as a transition year with continued investment in both capacity ramp and technology," CEO Christophe Fouquet said in a statement. "We currently see strong developments in AI, driving most of the industry recovery and growth, ahead of other market segments."

U.S. Bancorp (USB  ) shares popped on Wednesday after the bank holding company reported strong second-quarter results, with its net interest income notably its net interest income topping estimates at $4.02 billion for the quarter.

"This quarter we generated $6.9 billion in net revenue driven by improved linked quarter net interest income, supported by healthy deposit growth, and continued momentum in leveraging our diversified fee income platform to deepen relationships," CEO Andy Cecere said in a statement.

For Thursday:

Market participants will react to a series of Fedspeak, as well as earnings reports from companies including Alaska Air (ALK  ), Novartis (NVS  ) and Abbott Laboratories (ABT  ).