U.S. equities declined in Tuesday morning trade, with the Dow Jones Industrial Average falling over 570 points, the S&P 500 index down about 2.2%, and the Nasdaq Composite tumbling nearly 3.6%, erasing initial gains. The selloff was driven by a broader decline in technology stocks following Monday's surge. Chip stocks led the losses, with Nvidia Corp. shares down about 4% and shares of Intel Corp., Micron Technology Inc., Marvell Technology Inc., Advanced Micro Devices Inc., and ARM Holdings falling between 8% and 14%.
Wells Fargo Analyst Warns Stock Rally Sugar Rush Likely Over
According to a Bloomberg report, Wells Fargo analyst Ohsung Kwon warned that the "sugar rush" behind the recent stock surge is likely over. Kwon pointed to last Friday's 4% Nasdaq selloff, the index's worst single-day fall since April, as a reminder of the risks associated with the AI trade.
"With the war still going on and Hyperscalers raising capital to fund capex, we believe the narrow 'buy semis' trade will return," Kwon stated in a note. "But the 'sugar high' rally is now likely over, and we expect the speed of rally to slow," he added.
The iShares Semiconductor ETF was down about 8% at the time of writing.
Bank of America Strategists Advise Profit-Taking Amid Bear Market Signposts
Bank of America Securities strategists warned in a note last week that "there are too many red flags" regarding U.S. stocks and advised investors to take profits. According to a Bloomberg report, the strategists noted that 70% of bear market signposts had been triggered, which was in line with the average observed during previous market peaks.
UBS Expects Federal Reserve Rate Cut This Year
UBS Global Wealth Management's Alan Rechtschaffen said during an interview with CNBC on Tuesday that worries about the Federal Reserve's monetary policy direction are weighing on tech stocks. "People are concerned the market is pricing in Fed raises for the rest of the year. UBS thinks the Fed is actually going to cut rates," he added.
Rechtschaffen also stated that the pipeline of tech IPOs this year indicates that the U.S. is in a transformational period. "There's new technologies, between AI, longevity, power... there are things that are happening that never happened before and we're in, like, a Star Trek generation," he added.
Crude Oil Prices Fall as Trump Cites Potential Iran Deal Timeline
Crude oil prices fell on Tuesday, with the U.S. West Texas Intermediate crude futures maturing in July falling 2.37% to hover around $89.34 per barrel. Brent crude futures maturing in August fell 1.88%, hovering at $92.48 per barrel. The United States Oil Fund ETF and the ProShares Ultra Bloomberg Crude Oil ETF were down nearly 2% at the time of writing.
President Donald Trump said early Tuesday that a deal with Iran could be reached in "two or three days," according to a report by CNN. "The strait will open up right away. It'll open up immediately upon signing, which could be in two or three days," Trump added.
Meanwhile, Trump stated in a post on Truth Social that the Iranians shot down one of the Apache helicopters during a patrol over the Strait of Hormuz.
At the time of writing, the SPDR S&P 500 ETF, which tracks the S&P 500 index, was down 1.96%; the Invesco QQQ Trust ETF fell 3.61%; and the SPDR Dow Jones Industrial Average ETF Trust declined 0.91%. Retail sentiment on Stocktwits regarding the S&P 500 ETF was in the 'bullish' territory.
FAQ
What caused U.S. stocks to decline on Tuesday morning?
U.S. equities declined in Tuesday morning trade due to a broader selloff in technology stocks, particularly chip stocks. The Dow Jones Industrial Average fell over 570 points, the S&P 500 index dropped about 2.2%, and the Nasdaq Composite tumbled nearly 3.6%. Chip stocks including Nvidia Corp., Intel Corp., Micron Technology Inc., Marvell Technology Inc., Advanced Micro Devices Inc., and ARM Holdings fell between 4% and 14%.
What did Wells Fargo's analyst warn about the recent stock rally?
Wells Fargo analyst Ohsung Kwon warned that the "sugar rush" behind the recent stock surge is likely over. Kwon cited last Friday's 4% Nasdaq selloff, the index's worst single-day fall since April, as a reminder of the risks associated with the AI trade. He stated that while the narrow "buy semis" trade will return, the "sugar high" rally is now likely over and the speed of rally is expected to slow.
Why did crude oil prices fall on Tuesday?
Crude oil prices fell on Tuesday, with U.S. West Texas Intermediate crude futures down 2.37% to around $89.34 per barrel and Brent crude futures down 1.88% to $92.48 per barrel. President Donald Trump stated early Tuesday that a deal with Iran could be reached in "two or three days," adding that the Strait of Hormuz would open up immediately upon signing. Trump also mentioned that Iranians shot down one of the Apache helicopters during a patrol over the strait.
