Wall Street delivered a mixed performance on Tuesday, with the Dow Jones Industrial Average climbing 86 points to 50,872.11, while the Nasdaq Composite fell 0.97% to 25,678.82, dragged down by a renewed selloff in semiconductor stocks. The S&P 500 slipped 0.26% to 7,386.65, as investors weighed geopolitical risks in the Middle East and positioned for key inflation data and the highly anticipated SpaceX initial public offering.
Chip Stocks Retreat After Brief Rebound
Semiconductor shares reversed Monday's recovery, with the iShares Semiconductor ETF dropping over 3% after surging 6% the prior session. The fund had suffered a 10% decline on Friday, its steepest single-day drop in six years, amid concerns that the artificial intelligence-driven rally had become overheated. The Philadelphia Semiconductor Index fell as much as 8.6% during the session after initially rising 3% earlier in the day.
Micron Technology lost nearly 5%, giving back part of Monday's 10% gain, after declining roughly 20% over two sessions last week. Broadcom also fell more than 2%, as its recent rebound faded following investor disappointment over management's decision to maintain, rather than raise, its long-term AI revenue outlook despite strong quarterly results. The S&P 500 technology sector fell nearly 4% before recovering some losses later in the session.
Despite the pullback, the semiconductor index remains up more than 70% year-to-date, underscoring the powerful influence of AI-related investments on market performance. For context, Nvidia's recent rebound on South Korea AI deals highlights the ongoing volatility in the sector.
Middle East Tensions and Oil Prices
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 noted increasing shipping traffic through the Strait of Hormuz. Oil prices also eased after President Donald Trump indicated a potential US-Iran deal within days. However, sentiment deteriorated after Trump said Iran had shot down a US Apache helicopter patrolling the strait and pledged a response, raising fresh concerns about regional stability.
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 outperformed, with real estate supported by stronger-than-expected existing home sales data. The Rupee gained as oil retreated, reflecting broader currency market reactions to the geopolitical developments.
Investors Await CPI Data and SpaceX Debut
Market participants are now focused on Wednesday's consumer price index data for May, which could provide insight into whether rising energy costs linked to Middle East tensions are feeding into broader inflation. The data will be closely watched for its implications on Federal Reserve policy.
Additionally, SpaceX's expected market debut on Friday is drawing significant attention. 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 reposition portfolios ahead of the listing. Adding to the AI enthusiasm, OpenAI disclosed on Monday that it had confidentially filed for an IPO.
The Tesla rebound also reflects broader market dynamics tied to SpaceX's IPO and other catalysts.
This article is for informational purposes only and does not constitute financial advice.
