US stocks ended lower on Tuesday as rising sovereign bond yields and elevated oil prices increased concerns about persistent inflation and borrowing costs.
The S&P 500 fell 0.69%, while the Nasdaq Composite declined 1.33%. The Dow Jones Industrial Average dropped 116 points, or 0.22%, to close at 53,343.85.
The decline came as bond yields rose across major markets.
The US 30-year Treasury yield reached its highest level since 2007, while Japan’s 10-year government bond yield hit a three-decade high.
Germany’s 30-year yield reached its highest since 2011, and France’s 30-year yield climbed to its highest since 2008.
The increase in yields came as investors assessed the possibility that higher oil prices could keep inflation elevated. US crude futures rose 0.5% to $84.94 a barrel after also gaining on Monday.
Semiconductor stocks lead technology selloff
Semiconductor stocks were among the biggest decliners, adding pressure to the Nasdaq and S&P 500.
Western Digital fell 7%, while SanDisk dropped 9%. Marvell Technology declined 9%, and Seagate Technology lost 8%.
Nvidia and Micron Technology also fell after both stocks had gained almost 18% over the previous five sessions.
The Philadelphia Semiconductor Index declined as investors reduced exposure to stocks that had benefited from strong demand linked to artificial intelligence.
The information technology sector was the biggest percentage decliner among the S&P 500’s 11 major sectors and also represented the largest drag on the index.
Rising borrowing costs can weigh particularly heavily on high-growth technology companies because they reduce the value investors place on potential future earnings.
The shift was reflected in investor positioning, with healthcare and consumer staples outperforming as investors moved toward more defensive areas.
The CBOE Volatility Index also climbed to its highest level since August 5.
Middle East tensions keep oil and yields elevated
The rise in oil prices followed weakening prospects for an end to the conflict between the US and Iran.
President Donald Trump said Tuesday that the US was not engaged in talks or conversations with Iran and that none were scheduled. He also said the naval blockade remained in place.
Iran had previously threatened to adopt a fully offensive military posture, while Washington ruled out extending a ceasefire agreement. The developments increased concerns over energy supplies and contributed to higher oil prices.
The S&P 500 energy sector outperformed as crude prices remained elevated.
Investors are now awaiting the Federal Reserve’s minutes from its July meeting, due Wednesday, for additional clues about the central bank’s assessment of inflation and monetary policy.
Retail earnings will also remain in focus, with Walmart scheduled to report later in the week after Home Depot posted second-quarter sales above estimates.
Nvidia’s upcoming quarterly results are expected to provide another major test for the recent momentum in AI-related stocks.
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