Stocks on Wall Street experienced a decline on Tuesday, driven by a sell-off in major technology shares that extended from Asia to the U.S. Investors were concerned about the possibility of higher interest rates by the year-end.
The S&P index dropped by 1.4%, after having recorded gains in 11 out of the last 12 weeks, primarily led by technology stocks. Conversely, the Dow Jones Industrial Average, which is less tech-heavy, initially rose but ended the day down by 0.1%. The Nasdaq Composite fell by 2.2%.
Canada’s primary stock index, the TSX/S&P, closed slightly lower by 0.2%. Markets across Asia experienced declines, with South Korea’s KOSPI plummeting by 10%. European stocks also saw a slide in their values.
The technology sector bore the brunt of the market downturn, particularly companies that had witnessed a surge in their stock values amidst the AI technology craze. These high-priced tech stocks exerted significant influence on the overall market direction.
While more stocks within the S&P 500 were gaining than falling on Tuesday, the tech sector overshadowed gains in other areas. Micron Technology saw a decline of 13.2%, Nvidia dropped by 4.1%, and Samsung Electronics fell by 12.3% in South Korea.
SpaceX experienced fluctuation in early trading but closed with a 1% increase. The space exploration and AI firm had a strong market debut less than two weeks ago and announced plans for a bond offering to support AI development.
In the oil market, the price of Brent crude hovered around $77 US per barrel throughout the day, up from levels around $70 US per barrel before the onset of the Iran conflict four months ago.
The growing likelihood of interest rate hikes later in the year has contributed to the recent downturn in AI-related stocks, as traders fear that higher rates could impede economic growth. Analysts have cautioned about a potential correction in the overvalued tech sector.
The U.S. Federal Reserve has hinted at a possible interest rate increase before year-end. Market sentiment indicates an 85% probability of the central bank raising its benchmark interest rate in 2026. Bond yields remain elevated amid inflation concerns.
Furthermore, European and Asian markets witnessed declines, with Japan’s Nikkei 225 falling by 3.6% and South Korea’s KOSPI dropping by 10%. Regulatory scrutiny in South Korea’s semiconductor industry also contributed to the market sell-off.
