Wall Street’s performance slipped further from its peak on Tuesday, as artificial intelligence (AI) stocks continued their downward trend. The S&P 500 dropped by 0.7%, marking its third consecutive modest decline since reaching an all-time high the previous Thursday. Simultaneously, the Dow Jones Industrial Average slid by 116 points, or 0.2%, while the Nasdaq composite decreased by 1.3%.
Leading the retreat were stocks heavily involved in the AI technology surge. These stocks, including major players like NVIDIA and Broadcom, have fluctuated this summer amid concerns about overvaluations and potentially waning demand for memory and processors in data centers. Micron Technology, a seller of computer memory, saw its stock fall by 7%, significantly impacting the S&P 500. While these stocks remain overall winners, their recent volatility attracts scrutiny, especially with high interest rates.
In the bond market, yields remained elevated. The yield on the 10-year U.S. Treasury slightly decreased to 4.70% from 4.72% but stayed notably high compared to its earlier level of 3.97% before the conflict involving Iran. The 30-year Treasury yield also saw a minor decrease but stayed near its highest point since 2007.
High oil prices, driven by ongoing geopolitical tensions, continue to put upward pressure on inflation. Concerns over the sizeable government debts and increased borrowing also contribute to high yields.
Elevated yields make investors hesitant to pay premium prices for stocks, especially those considered expensive. Pressures on yields are partly due to crude oil price movements; Brent crude rose 0.2% to $91.02 per barrel amid uncertainty surrounding U.S. and Iran negotiations over oil tanker movements in the Persian Gulf.
The rise in yields has pushed up long-term U.S. mortgage rates, now near their highest in a year, adversely affecting the housing industry. Recent data showed that new housing starts were lower than expected, restraining Home Depot’s stock price despite the company surpassing profit and revenue forecasts. Home Depot’s CFO, Richard McPhail, noted a trend toward smaller home improvement projects among customers.
High yields could also impact the financing available for Big Tech’s data center investments, threatening a significant economic growth driver.
Elsewhere, Klarna’s stock plunged by 22.8%, despite the payments company surpassing earnings expectations; it revised its financial forecasts for 2026 due to projected challenges in Germany, its largest market.
Meta Platforms experienced a 4.4% drop as states initiated a significant trial in a California federal court, seeking damages for social media’s impact on children.
The final tally saw the S&P 500 fall by 53.30 points to 7,691.76. The Dow Jones dipped by 116.38 to 53,343.40, and the Nasdaq composite decreased by 355.20 to 26,289.71. Internationally, stock indices showed mixed results across Europe and Asia. South Korea’s Kospi dropped 1.5%, a comparatively mild shift following days of high volatility influenced by AI dynamics in a market led by Samsung Electronics and SK Hynix.
Yuri Kageyama of AP Business Writer contributed to this report.
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