Stocks on Wall Street experienced a decline on Tuesday as concerns over potential interest rate hikes later in the year led to a sell-off in major technology stocks. The S&P dropped by 1.4%, ending a streak of 11 weekly gains out of the last 12, driven primarily by tech stocks. The Dow Jones Industrial Average, less tech-dependent, initially rose but closed down by 0.1%. The Nasdaq Composite fell by 2.2%.
In Canada, the main stock index, TSX/S&P, finished the day with a slight 0.2% decline. Asian markets also saw a downturn, with South Korea’s KOSPI plummeting by 10%. European stocks followed suit.
Tech stocks, particularly those in the artificial intelligence sector, exerted the most significant pressure on the market due to their inflated values. Companies like Micron Technology, Nvidia, and Samsung Electronics experienced notable declines. SpaceX, however, fluctuated before closing 1% higher and announced plans for a bond offering to support its AI development endeavors.
The price of Brent crude oil held steady around $77 US per barrel, remaining elevated from pre-war levels of approximately $70 US per barrel before the conflict in Iran began four months ago.
Wall Street investors are anticipating higher interest rates, which have tempered the recent surge in AI-related stocks. Analysts have warned of a potential correction in the overvalued tech sector. The Federal Reserve has hinted at a rate increase before year-end, with an 85% probability according to market expectations.
European and Asian markets mirrored the trend, with European shares, Japan’s Nikkei 225, South Korea’s KOSPI, Hong Kong’s Hang Seng Index, and China’s Shanghai Composite all experiencing declines. Regulatory concerns in South Korea’s semiconductor sector contributed to the sell-off in tech stocks.