Wall Street closed sharply lower on Tuesday, pulled down by tech and industrial stocks. Investor sentiment continued to be grim on AI spending concerns, especially in the semiconductor sector. All three benchmark indexes ended firmly in the red.
How Did the Benchmarks Perform?
The Dow Jones Industrial Average (DJI) slid 0.1%, or 47.22 points, to close at 51,665.49. Nineteen components of the 30-stock index ended in positive territory, while 11 ended in negative.
The tech-heavy Nasdaq Composite fell 579.56 points, or 2.2%, to close at 25,587.04.
The S&P 500 lost 107.32 points, or 1.4%, to close at 7,365.47. Five of the 11 broad sectors of the benchmark index closed in the red. The Technology Select Sector SPDR (XLK), the Industrials Select Sector SPDR (XLI) and the Materials Select Sector SPDR (XLB) declined 3.7%, 2% and 1.6%, respectively, while the Consumer Staples Select Sector SPDR (XLP) advanced 1.8%.
The fear gauge CBOE Volatility Index (VIX) increased 12.8% to 19.49. A total of 24.1 billion shares were traded on Tuesday, higher than the last 20-session average of 22.5 billion. Decliners outnumbered advancers by a 1.31-to-1 ratio on the NYSE and by a 1.21-to-1 ratio on the Nasdaq.
Semiconductor Rout Continues for Second Straight Session
The Philadelphia Semiconductor Index (SOX) tumbled 7.9% on Tuesday, marking one of its sharpest daily declines of the year and sparking a broad retreat across U.S. equities. Semiconductor stocks, which had been among Wall Street’s strongest performers amid the artificial-intelligence (AI) boom, came under heavy pressure as investors reassessed growth expectations and valuations.
The selloff was fueled by concerns that the massive spending on AI infrastructure and data centers may be running ahead of sustainable demand. Investors also worried that many technology companies are relying heavily on borrowing to finance expansion, increasing vulnerability if economic conditions weaken or financing costs remain elevated.
Adding to the pressure were rising expectations that the Fed could maintain a restrictive monetary policy for longer than previously anticipated. Higher interest rates tend to weigh on high-growth technology and semiconductor companies because they reduce the present value of future earnings and make capital-intensive investments more expensive.
Consequently, shares of Marvell Technology, Inc. MRVL and Intel Corporation INTC slid 9.4% and 6.1%, respectively. Both currently carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Oil Falls as Progress in U.S.-Iran Talks Eases Supply Concerns
Oil prices closed lower on Tuesday as traders focused on developments surrounding the Strait of Hormuz and growing optimism over U.S.-Iran negotiations. Brent crude slipped 1.1% to $77.08 per barrel, while WTI crude fell 0.9% to $73.21, leaving both benchmarks near four-month lows.
The market remained under pressure after the United States granted Iran a 60-day sanctions waiver following initial talks. Sentiment was further supported by an agreement between Oman and Iran to continue discussions on the future management of the Strait of Hormuz, while U.S. officials reiterated that Iran would not be allowed to levy tolls on vessels using the vital shipping route.
No economic data was released on Tuesday.
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