US equities closed lower on Tuesday, with the Dow Jones Industrial Average shedding 110 points (0.22%) to finish at 53,343.85. The broader market also retreated, as the S&P 500 dropped 0.69% and the Nasdaq Composite declined 1.33%. The selloff was driven by a sharp rise in government bond yields and elevated crude oil prices, which reignited concerns about persistent inflation and higher borrowing costs.
Bond yields hit multi-year highs
The yield on the 30-year US Treasury climbed to its highest level since 2007, while Japan's 10-year government bond yield reached a three-decade high. Germany's 30-year yield touched its highest since 2011, and France's 30-year yield rose to levels not seen since 2008. The upward pressure on yields reflects investor expectations that inflation may remain sticky, partly due to rising energy prices.
US crude futures advanced 0.5% to $84.94 a barrel, adding to Monday's gains. The increase in oil prices has been supported by ongoing tensions between the US and Iran, which have raised concerns about potential supply disruptions.
Semiconductor stocks lead tech selloff
Semiconductor names were among the hardest hit, weighing heavily on the Nasdaq and the S&P 500. Western Digital fell 7%, while SanDisk dropped 9%. Marvell Technology declined 9%, and Seagate Technology lost 8%. Nvidia and Micron Technology also retreated, despite having surged nearly 18% over the previous five sessions.
The Philadelphia Semiconductor Index slid as investors trimmed exposure to stocks that had rallied on artificial intelligence optimism. The information technology sector was the biggest percentage decliner among the S&P 500's 11 major sectors and also represented the largest drag on the index.
Rising borrowing costs tend to weigh more heavily on high-growth technology companies because they reduce the present value of future earnings. This dynamic was evident in Tuesday's trading, as investors rotated into defensive sectors such as healthcare and consumer staples. The CBOE Volatility Index (VIX) also climbed to its highest level since August 5, reflecting increased market anxiety.
Oil and geopolitical tensions
The rise in oil prices followed a weakening outlook for a resolution to the US-Iran conflict. President Donald Trump said Tuesday that the US was not engaged in talks with Iran and that none were scheduled, while also stating that the naval blockade remains in place. Iran had previously threatened a fully offensive military posture, and Washington ruled out extending a ceasefire agreement. These developments heightened concerns about energy supplies and contributed to higher crude prices.
The S&P 500 energy sector outperformed as oil remained elevated, but the broader market struggled under the weight of rising yields.
Looking ahead
Investors are now awaiting the release of the Federal Reserve's minutes from its July meeting, scheduled for Wednesday, for additional clues about the central bank's assessment of inflation and monetary policy. Retail earnings will also remain in focus, with Walmart set to report later in the week after Home Depot posted second-quarter sales that beat estimates.
Nvidia's upcoming quarterly results are expected to be a major test for the recent momentum in AI-related stocks. The company's performance could influence market sentiment across the technology sector. For more on the chip sector's recent moves, see Micron's decline amid yield pressure and Nvidia's slide as yields top 5.3%.
This article is for informational purposes only and does not constitute financial advice.
