Tech Sell-Off Drags Wall Street Lower as Rate-Hike Fears Grow and AI Stocks Retreat
The S&P fell 1.4%. The benchmark index is coming off 11 weekly gains out of the last 12, led largely by technology stocks. The Dow Jones Industrial Average, which is less influenced by tech stocks, gave up an early gain and closed just 0.1% lower. The Nasdaq composite fell 2.2%.
Oil prices have eased amid negotiations between the U.S. and Iran to end their war. The price for a barrel of U.S. crude for August delivery fell 0.9% to settle at $73.21. The September delivery price for a barrel of Brent crude, the international standard, fell 0.9% to settle at $76.80. Prices are still above levels of roughly $70 per barrel before the war began.
The selling largely targeted companies that have seen their values surge amid the frenzy over artificial intelligence technology. Their pricey stock values give them more influence over the broader market?s direction. On Tuesday, more stocks gained ground within the S&P 500 than fell but tech companies overpowered gains elsewhere. The growing likelihood of interest rate hikes later this year has helped deflate the massive run-up in AI-related stocks in recent days as traders worry that the higher rates could hamper economic growth. Those Big Tech gains have been significant, sending major indexes on record-setting runs throughout 2026. Analysts have been warning that high-flying technology stocks could be due for a downturn.
Inflation has been heating up throughout the year. The impact from tariffs helped halt and reverse what had been an easing of inflation growth. The U.S. war with Iran quickly pushed energy prices higher, including gas prices. Higher energy costs have also made shipping more expensive for a wide range of goods, and that has been weighing on businesses and households. A report due Thursday with an inflation measure that is preferred by the Fed is expected to show that inflation rose to 4.1%, in May.
Many technology companies have been spending heavily on AI technology. The potential for higher interest rates can stifle future spending and hurt prices for investments. The Federal Reserve has signaled that it could raise interest rates at least once before the end of the year. Wall Street sees an 85% chance that the central bank will raise its benchmark interest rate this year, according to date from CME Group. That?s compared to 60% a week earlier.
Micron Technology slumped 13.2% and Nvidia fell 4.1%. Samsung Electronics slumped 12.3% in South Korea. SpaceX wavered in early trading then closed 1% higher. The space exploration and artificial intelligence company had a soaring market debut less than two weeks ago. The company plans to raise money through a bond offering, partly to fund AI development.
The yield on the 10-year Treasury slipped to 4.50% from 4.51% late Monday. The yield on the 2-year Treasury fell to 4.20% from 4.24% late Monday. Bond yields remain high, though, amid worries about inflation.
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