Technology stocks dragged Wall Street lower on Tuesday as a rebound in semiconductor shares lost momentum, while investors weighed renewed geopolitical uncertainty in the Middle East and prepared for key inflation data and the highly anticipated SpaceX initial public offering.
The S&P 500 fell 0.26% to 7,386.65, while the Nasdaq Composite dropped 0.97% to 25,678.82.
The Dow Jones Industrial Average outperformed, rising 86.10 points, or 0.17%, to 50,872.11.
The session marked a reversal from Monday’s technology-led rebound as investors resumed selling semiconductor stocks following last week’s sharp decline.
Chip stocks retreat after brief rebound
Semiconductor shares were among the weakest performers during Tuesday’s session.
The iShares Semiconductor ETF fell more than 3% after rebounding 6% on Monday.
The fund had already suffered a 10% decline on Friday, its worst daily performance in six years, amid concerns that the artificial intelligence-driven rally in chip stocks had become overheated.
Micron Technology dropped nearly 5%, giving back part of Monday’s 10% gain.
The stock had lost roughly 20% over two sessions last week, including a 13% plunge on Friday.
Broadcom also declined more than 2% as its recent rebound faded.
The chipmaker had come under pressure after investors reacted negatively to management’s decision to maintain, rather than raise, its long-term artificial intelligence revenue outlook despite strong quarterly results.
The Philadelphia Semiconductor Index fell as much as 8.6% during the session after initially rising 3% earlier in the day.
Technology stocks broadly remained under pressure.
The S&P 500 technology sector fell nearly 4% before recovering some losses later in the session.
Middle East tensions and oil prices remain in focus
Markets initially found support from falling energy prices.
West Texas Intermediate crude futures fell about 3% to below $90 per barrel after US Energy Secretary Chris Wright said shipping traffic through the Strait of Hormuz was increasing significantly.
Oil prices also eased after President Donald Trump said a deal between the United States and Iran could be reached within “two or three days” and that the Strait of Hormuz could reopen immediately.
However, sentiment deteriorated after Trump later said Iran had shot down a US Apache helicopter patrolling the Strait of Hormuz and pledged a response.
The development raised fresh concerns about the prospects for a lasting ceasefire in the region and contributed to a rise in market volatility.
The Cboe Volatility Index climbed to its highest level since April 7 during the session.
While lower oil prices weighed on energy stocks, other sectors benefited. Materials, consumer discretionary, and real estate shares outperformed, with real estate receiving support from stronger-than-expected existing home sales data.
Investors await inflation data and SpaceX debut
Market participants are also preparing for several major events later this week.
Consumer price index data for May is scheduled for release on Wednesday and could provide insight into whether rising energy costs linked to the conflict in the Middle East are affecting inflation.
Investors are also closely watching SpaceX’s expected market debut on Friday.
The company is seeking to raise $75 billion at a valuation of $1.75 trillion, which would make it the largest IPO in history.
Some strategists believe the offering is contributing to recent weakness in semiconductor shares as investors lock in profits and potentially reposition portfolios ahead of the listing.
Adding to enthusiasm around artificial intelligence investments, OpenAI disclosed on Monday that it had confidentially filed for an initial public offering.
Despite the recent pullback, the semiconductor index remains up more than 70% for the year, underscoring the powerful influence that artificial intelligence-related investments continue to have on market performance.
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