Stocks on Wall Street experienced a decline on Tuesday due to a sell-off in major technology shares that extended from Asia to the United States. Concerns about potential interest rate hikes by the end of the year contributed to the market downturn.
The S&P index dropped by 1.4%, following a streak of 11 out of 12 weekly gains, driven primarily by technology stocks. The Dow Jones Industrial Average, less reliant on tech shares, initially rose but ultimately fell by 0.1% at the close. The Nasdaq Composite saw a significant decline of 2.2%.
In Canada, the TSX/S&P index finished slightly lower by 0.2%. Market downturns were observed in Asia, including a 10% decline in South Korea’s KOSPI, as well as in European stock markets.
The technology sector exerted significant downward pressure on the market, particularly affecting companies with soaring valuations due to the hype surrounding artificial intelligence technology. These high-priced tech stocks have a substantial impact on the overall market direction.
Although more stocks within the S&P 500 were rising than falling on Tuesday, the dominance of tech companies outweighed gains in other sectors. Micron Technology saw a 13.2% slump, while Nvidia fell by 4.1%. In South Korea, Samsung Electronics experienced a notable drop of 12.3%.
SpaceX initially fluctuated in early trading but closed 1% higher. The space exploration and AI company, which recently had a successful market debut, intends to raise funds through a bond offering to support its AI development initiatives.
Oil prices remained relatively stable, with Brent crude hovering around $77 US per barrel throughout the day. Prices have risen from approximately $70 US per barrel before the outbreak of the Iran war four months ago.
The anticipation of interest rate hikes later in the year has tempered the rapid rise of AI-related stocks in recent days, as traders express concerns about the potential impact of higher rates on economic growth. Analysts have cautioned that the lofty valuations of technology stocks may be due for a correction.
The U.S. Federal Reserve has indicated the possibility of a rate increase before the year’s end. Wall Street is betting heavily on an 85% probability of a benchmark rate hike in 2026, up from 60% the previous week. Bond yields remain elevated amid inflation worries.
In Europe, shares declined, with the STOXX 600 falling by 0.51%, primarily due to losses in semiconductor and chip-equipment manufacturers. Earlier in Asia, Japan’s Nikkei 225 index dropped by 3.6%.
South Korea’s KOSPI plunged by 10%, moving down from record highs as major technology stocks experienced a sell-off. Increased regulatory scrutiny in the semiconductor sector also contributed to the market downturn.
Hong Kong’s Hang Seng Index and China’s Shanghai Composite both experienced declines of 1.8% and 1.4%, respectively.