Stocks experienced a decline on Wall Street on Tuesday, with concerns over potential interest rate hikes leading to a sell-off in major technology shares that originated in Asia and extended to the U.S. The S&P dropped by 1.4%, following a streak of 11 weekly gains out of the last 12, primarily driven by tech stocks. The Dow Jones Industrial Average, less tech-dependent, initially rose but ended the day down by 0.1%. The Nasdaq Composite fell by 2.2%. Canada’s TSX/S&P index also closed slightly lower by 0.2%.
Stock markets in Asia and Europe mirrored the downward trend, with South Korea’s KOSPI plummeting by 10%. Technology stocks, particularly those benefiting from the artificial intelligence frenzy, exerted significant pressure on the markets due to their inflated valuations.
Within the S&P 500, more stocks were advancing than declining on Tuesday, but tech companies overshadowed gains elsewhere. Notable declines included Micron Technology dropping by 13.2%, Nvidia falling by 4.1%, and Samsung Electronics decreasing by 12.3%.
SpaceX experienced fluctuations in early trading but closed 1% higher. The company, known for its space exploration and AI endeavors, had a successful market debut recently and plans to raise funds through a bond offering for further AI development.
Oil prices remained steady, with Brent crude hovering around $77 per barrel. Despite geopolitical tensions impacting oil markets, prices have maintained an increase from pre-war levels.
The expectation of interest rate hikes later this year has dampened the soaring AI-related stock rally, as investors fear potential hindrances to economic growth. Analysts caution that the high-flying tech sector, which has seen substantial gains in recent months, may be due for a correction.
The U.S. Federal Reserve’s indication of a possible rate increase has led to market speculation, with an 85% probability of a benchmark interest rate hike in 2026. Bond yields, although slightly lower, continue to be elevated amid inflation concerns.
In Asian and European markets, shares also experienced declines, with losses in semiconductor and chip-equipment manufacturers impacting European markets. The Nikkei 225 in Japan dropped by 3.6%. Regulatory uncertainties in South Korea’s semiconductor industry contributed to the KOSPI’s 10% decline, while Hong Kong’s Hang Seng Index and the Shanghai Composite also saw losses.
