Why ASML Stock Sank Today

ASML (NASDAQ: ASML) stock saw a big valuation pullback in Wednesday's trading. The company's share price fell 7% in the day's trading, and had been down as much as 8.6% earlier in the session. Meanwhile, the S&P 500 (SNPINDEX: ^GSPC) fell 2.2%, and the Nasdaq Composite (NASDAQINDEX: ^IXIC) fell 3.1%.

ASML reported its first-quarter results before the market opened this morning and posted earnings that actually came in far better than the market's expectations. Unfortunately, the Q1 report arrived with new restrictions preventing the export of chips to China, another big tariff hike on the country, and comments that suggest the Federal Reserve is in no hurry to lower interest rates.

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ASML stock falls despite encouraging Q1 results

ASML reported earnings of 6 euros per share on sales of 7.74 billion euros. While the company's earnings per share beat the market's target by 0.20 euros, revenue fell roughly 40 million euros short of Wall Street's expectations. Sales were still up 46% year over year in the quarter, and the semiconductor manufacturing equipment specialist reiterated its full-year guidance for sales between 30 billion euros and 35 billion euros and a gross margin between 51% and 53%.

All in all, the company's Q1 results and forward guidance looked solid -- but macroeconomic and geopolitical pressures drove sell-offs for the stock.

Chip stocks tumble on new challenges and uncertainty

The Trump administration announced late yesterday that it was raising tariffs on Chinese goods from 145% to 245%, and investors also received news that export restrictions on processors from Nvidia and AMD had been expanded.

The market also had a bearish reaction to the latest comments from Federal Reserve Chairman Jerome Powell. Investors have been hoping that the Fed will cut interest rates in the near future, but Powell said today that the central banking authority will likely hold off on such a move until the impacts of the new tariffs on inflation and economic growth are more apparent.

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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends ASML, Advanced Micro Devices, and Nvidia. The Motley Fool has a disclosure policy.