Stocks on Wall Street experienced a decline on Tuesday, with a sell-off in major technology stocks impacting markets globally. Concerns over potential interest rate hikes later in the year triggered the downturn.
The S&P 500 index dropped by 1.4%, following a streak of 11 out of 12 weeks with gains driven primarily by technology stocks. The Dow Jones Industrial Average, less reliant on tech stocks, initially rose but ultimately fell by 0.1% at the close. The Nasdaq Composite fell by 2.2%.
Canada’s main stock index, the TSX/S&P, ended the day down by 0.2%. Asian markets, including a significant 10% drop in South Korea’s KOSPI, and European markets also recorded losses.
The technology sector bore the brunt of the market decline, particularly companies that have witnessed substantial valuation increases due to the hype surrounding artificial intelligence technology. These high-priced tech stocks exerted significant influence on broader market movements.
While more stocks in the S&P 500 were on the rise than falling on Tuesday, the tech sector dominated gains. Micron Technology slumped by 13.2%, Nvidia by 4.1%, and Samsung Electronics by 12.3%.
SpaceX fluctuated in early trading but closed with a 1% increase. The space exploration and AI company, which recently had a successful market debut, is planning a bond offering to raise funds for AI development.
In the oil market, the price of Brent crude remained stable at around $77 US per barrel throughout the day, higher than pre-Iran war levels of approximately $70 US per barrel four months ago.
The anticipation of interest rate hikes this year has tempered the surge in AI-related stocks, with traders concerned that higher rates could impede economic growth. Analysts have cautioned that the soaring technology stocks might be due for a correction.
The U.S. Federal Reserve has indicated the possibility of a rate hike before the end of the year, with Wall Street estimating an 85% chance of an increase in the benchmark interest rate. Bond yields, reflecting inflation concerns, remained elevated.
European markets, including the STOXX 600, faced a 0.51% decline, influenced by losses in semiconductor and chip-equipment makers. Earlier in Asia, Japan’s Nikkei 225 dropped by 3.6%.
Overall, global markets experienced a downturn, with South Korea’s KOSPI witnessing a significant 10% decline, and other major indices like Hong Kong’s Hang Seng Index and the Shanghai Composite also registering losses.
