US stocks closed lower on Tuesday, with the S&P 500 down 0.69% to finish at a two-week low, the Dow Jones Industrial Average down 0.22%, and the Nasdaq 100 sliding 1.68% to a 1.5-week low. The selloff was driven largely by weakness in chipmakers and AI infrastructure names, while rising crude oil prices fed concerns about higher inflation and pushed global bond yields up earlier in the session.
E-mini S&P futures fell 0.69% and September E-mini Nasdaq futures declined 1.67% as markets weighed geopolitical risk in the Middle East against the outlook for corporate earnings and central-bank policy.
Key takeaways
- Index move: The S&P 500 fell 0.69%, the Dow slipped 0.22%, and the Nasdaq 100 dropped 1.68%.
- Catalyst: A rout in semiconductor and AI-infrastructure stocks coincided with higher crude oil prices and inflation-sensitive bond yields.
- Rates angle: US Treasury yields rose after oil climbed, though they later backed off as stocks pared losses.
- Investor implication: Markets appeared split between caution from macro/rates signals and support from still-strong earnings expectations.
What drove the selloff
Technology weakness weighed on broader sentiment, particularly among chip and AI infrastructure companies. Shares in the semiconductor complex fell across the board, with the iShares Semiconductor ETF down nearly 5%, and several major names—including SanDisk, Seagate Technology, Marvell Technology, Western Digital, and Micron Technology—closing more than 7% lower. Other widely held hardware and semiconductor-related stocks also declined, reflecting a risk-off move concentrated in the group.
Outside of equities, crude oil moved higher on Tuesday, reinforcing inflation concerns. WTI crude climbed to a three-week high after a vessel exiting the Strait of Hormuz was reportedly struck by an unknown projectile. President Trump also said he is not interested in extending an expired Iran agreement, adding uncertainty around the Strait’s reopening and potentially tightening expectations for Middle East supply.
The oil-driven inflation narrative initially spilled into the bond market. US yields were pushed up as markets repriced the inflation outlook, though that pressure eased later in the day as Treasury yields fell from highs.
Market reaction and the rates backdrop
US Treasury dynamics helped explain how investors balanced macro concerns with demand for safety when stocks retreated. September 10-year T-notes ended the session higher, with the yield down 1.8 basis points to 4.704%, after having risen earlier when oil prices climbed.
Data also contributed to rate moves during the session. The July pending home sales report came in weaker, which supported Treasuries as it tempered some rate-sensitive worries. At the same time, oil strength pushed up inflation expectations earlier; the 10-year breakeven inflation rate rose to a two-month high of 2.308%.
Overseas, European government bonds also moved higher. The 10-year German bund yield finished up 3.8 basis points to 3.259%, and the 10-year UK gilt yield ended up 2.0 basis points to 5.080%, underscoring how energy-driven inflation risks were influencing global rate expectations. In addition, ECB Chief Economist Philip Lane said Eurozone consumer price inflation is likely to stay “well above” the ECB’s 2% target this year due to the Iran war, reinforcing the challenge for policymakers.
Economic updates and company-specific catalysts
US housing data was mixed. July housing starts fell 12.4% month over month to 1.239 million, below expectations, while July building permits rose 5.0% to a five-month high of 1.443 million, beating expectations and suggesting construction activity could stabilize even as starts cooled.
Other economic releases were also mixed for the outlook. The July import price index excluding petroleum rose 0.3% month over month, stronger than expectations, and July manufacturing production increased 0.2% month over month, in line with forecasts. Pending home sales, however, fell 2.3% month over month, weaker than expectations.
Individual stocks delivered additional cross-currents. Software names were among the few bright spots: Intuit rose more than 4%, while Adobe gained more than 3%, supporting the Nasdaq’s decline being less uniform than the semiconductor selloff. Several non-tech and healthcare-related developments also drove outsized moves, including Amylyx Pharmaceuticals, which jumped after stating its GLP-1 receptor met a primary endpoint in a late-stage trial, and Targa Resources, which climbed after signing a 20-year integrated midstream agreement with ExxonMobil.
Other notable single-stock moves included Klarna Group, which dropped more than 22% after cutting its full-year revenue forecast, and Fabrinet, which declined more than 19% despite reporting better-than-expected fourth-quarter EPS as Datacom sales disappointed. Meta Platforms also fell more than 4% as it faces a jury trial in federal court tied to claims about its design of Facebook and Instagram.
Earnings expectations vs. Fed pricing
Despite Tuesday’s index declines, earnings expectations provided a partial offset to the macro pressure. According to Bloomberg Intelligence, the S&P 500 is tracking for nearly 32% earnings growth in the second quarter, above a projection of 23%, and AI-related spending is expected to drive a large share of the earnings-per-share growth. Bloomberg data also cited that 85% of the S&P 500 companies that reported second-quarter earnings at that point beat estimates.
Interest-rate expectations remained an important driver of equity pricing. Markets were discounting a 35% chance of a 25 basis point rate hike at the next FOMC meeting on September 15–16, keeping investors focused on how inflation signals and central-bank messaging may evolve.
Bigger picture: what to watch next
With crude oil still influencing inflation expectations and the semiconductor complex carrying the heaviest weight in Tuesday’s decline, the next catalysts for investors are likely to include continued earnings updates and further rate guidance from policymakers. Attention will also turn to the path of bond yields as markets digest mixed economic releases and assess whether elevated energy prices persist.
Investors also have a slate of company earnings scheduled for August 19, including Analog Devices, BILL Holdings, Estee Lauder, Lowe’s, Nordson, Target, TJX, and Viking Holdings.
