Wall Street opened with modest gains on Thursday, as optimism over a potential agreement to reopen the Strait of Hormuz helped lift the Dow Jones Industrial Average by about 40 points (0.1%). However, the broader market was held back by a sharp decline in semiconductor and software stocks, which offset the positive sentiment from geopolitical developments.
The S&P 500 was nearly flat after both it and the Dow reached record highs earlier this week. The Nasdaq Composite fell 0.42%, dragged down by weakness in tech names despite generally upbeat earnings reports. Investors also weighed fresh labor market data ahead of Friday's closely watched nonfarm payrolls report, while keeping an eye on Middle East developments that could influence energy prices and Federal Reserve policy.
Chip and software stocks slide despite strong outlooks
Semiconductor stocks led the decline after investors reacted negatively to quarterly forecasts from several technology companies. Western Digital fell more than 18% after issuing revenue guidance that exceeded Wall Street expectations but failed to satisfy investors following the stock's sharp rally this year. SanDisk dropped more than 11% despite also forecasting revenue above estimates, as the company continued to benefit from AI-driven demand.
The weakness spread across the broader semiconductor sector. Micron Technology declined about 5%, while Advanced Micro Devices, Marvell Technology, and Intel also traded lower. Software stocks followed suit, with AppLovin plunging about 18% after missing quarterly revenue expectations, and Datadog falling roughly 15.8% after reporting second-quarter results.
Among megacap technology companies, Meta Platforms and Amazon posted modest gains, while Apple advanced about 1%. Alphabet gained slightly even after reports that the company is seeking to raise as much as $25 billion through a US bond offering. The stock had already fallen 4% in the previous session following its AI leadership restructuring. SpaceX shares rose about 0.9% ahead of the expiration of the first tranche of its post-IPO lock-up period, which could significantly increase the number of publicly tradable shares.
Middle East developments remain market focus
Investor sentiment continued to be influenced by diplomatic developments surrounding the Strait of Hormuz. Reports indicated that Iran and Oman were moving closer to an agreement that could reopen the strategic waterway, a route through which a significant share of global oil shipments passes. Under a temporary arrangement, shipping through the strait would reportedly not be subject to fees or tolls.
Brent crude traded near $80 per barrel as markets awaited further details on any potential agreement between Iran and the United States. The improving outlook for energy supplies has helped support broader equity markets this week, as lower oil prices eased concerns about inflation and interest rates. For more on the oil market's reaction, see Brent slips below $80.
Economic data and Fed outlook in focus
Markets also digested fresh economic data ahead of Friday's employment report. The Labor Department reported that initial jobless claims totaled 199,000 for the latest week, below economists' expectations of 202,000, suggesting the labor market remains relatively resilient. With Federal Reserve Chair Kevin Warsh offering little forward guidance, markets remain divided over the September policy meeting.
According to CME FedWatch data, expectations for a rate hike and for rates to remain unchanged have moved closer to even, reflecting continued uncertainty over the path of monetary policy. Investors are also monitoring the AI trade's cooling, as seen in the recent futures split and the AMD stock drop despite record Q2 results.
As the market navigates these crosscurrents, the upcoming jobs report will likely be a key catalyst for near-term direction. The combination of geopolitical optimism and tech sector volatility suggests that investors should brace for continued swings.
This article is for informational purposes only and does not constitute financial advice.
