The S&P 500 and Nasdaq Composite fell on Tuesday, even as oil prices retreated, as a surge in chip stocks lost momentum after a one-day gain.
The broad market index fell 0.26%, while the Nasdaq Composite fell 0.97%. The Dow Jones Industrial Average gained about 85 points, or 0.17%.
The iShares Semiconductor ETF lost more than 3% after recovering 6% on Monday. The ETF fell 10% on Friday, its worst day in six years, as investors feared the AI-fueled chip rush had grown too fast and too high. Micron Technology fell nearly 5% after a 10% rebound on Monday. Shares fell about 20% in two days last week, including a 13% drop on Friday. Broadcom, which had an equally steep two-day decline last week, fell more than 2% after Monday’s recovery fizzled.
Markets earlier rose as energy prices fell amid hopes of a permanent end to hostilities in the Middle East.
West Texas Intermediate crude futures lost 3% to trade below $90 a barrel at around $88 after US Energy Secretary Chris Wright said shipping traffic in the Strait of Hormuz was “growing very significantly”. The move also comes after President Donald Trump said a deal between the US and Iran could be reached in “two or three days” to reopen the Strait of Hormuz “immediately”.
Although shares of energy firms on the S&P 500 fell by 2%, the drop in oil prices had an otherwise positive impact. Materials and consumer staples led the large-cap index, which also got a boost from real estate after better-than-expected data on existing home sales. In contrast, information technology fell by almost 4%, reports SEEbiz.
Jay Hatfield, chief executive of Infrastructure Capital Advisors, noted that investors are shifting from secular growth stocks to cyclical growth names like Home Depot, which could benefit from the reopening of the Straits. Along with the fact that June is also typically “not a good month” for stocks, Hatfield attributed some of the recent selling pressure to Space X’s initial public offering later this week, saying the event is likely overhyped in the market.
“I think everybody’s a little nervous,” Hatfield told CNBC. “I think we’re going to be unstable until we’re done with that [IPO-om Space X-a].”
OpenAI filed confidentially for an initial public offering late Monday, adding to the enthusiasm surrounding the AI trade. Space and artificial intelligence: SpaceX will debut Friday in what will be the largest initial public offering ever. Some see the offering as fuel for a booming AI-driven market, but some investors are wary that it could also mark the peak of a $1.75 trillion trend.
