The S&P 500, Dow Jones, and Nasdaq 100 all closed lower Tuesday, with the Nasdaq hitting a 1-week low. Pressure stemmed from a chipmaker selloff, exacerbated by Samsung’s disappointing earnings despite a 19-fold profit surge. Investors questioned the sustainability of AI-driven spending, prompting selloffs in semiconductor stocks like ASML (-4%) and Intel (-9%).
Geopolitical tensions in the Strait of Hormuz escalated with missile attacks and shipping disruptions, pushing crude prices to a 1.5-week high. This drove up oil-linked inflation expectations, pushing the 10-year Treasury yield to a 3.5-week high of 4.54%. The Fed’s hawkish comments from New York Fed President John Williams further weighed on bonds.
Energy stocks rallied as crude surged, boosting producers like Chevron (+3%) and Exxon Mobil (+3%). Conversely, airlines and cruise lines fell amid oil-driven costs. Software stocks provided a rare lift, with Workday (+4%) and Palantir (+1%) leading gains.
Strong Q2 earnings forecasts (+23% above estimates) offered some optimism, though AI infrastructure stocks dominated the optimism. Meanwhile, derivatives markets priced a 27% chance of a 25-basis-point rate hike at the July 28-29 Fed meeting.
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