U.S. stock indexes traded mixed as the Nasdaq 100 slipped to a 2.5-month low, while the S&P 500 and the Dow held modest gains. The shift was largely driven by weakness in chipmakers and other AI-related infrastructure stocks, even as several software names rallied and oil prices dropped sharply after renewed indications of restraint between the United States and Iran.
In rates markets, the decline in crude translated into lower inflation expectations, pulling the yield on the 10-year Treasury down while investors weighed expectations for upcoming central-bank decisions and an active week of megacap earnings.
Key takeaways
- Index moves: The S&P 500 rose about 0.11% and the Dow gained roughly 0.54%, while the Nasdaq 100 fell about 0.46%.
- Catalyst: Chip and AI-infrastructure weakness weighed on the broader tape as crude oil dropped more than 6% amid easing Middle East tensions.
- Earnings outlook: Investors looked ahead to a wave of megacap technology results this week, with expectations for continued earnings growth.
- Rates implication: The move in oil helped drag the 10-year Treasury yield lower, reflecting easing inflation expectations.
- What it means: Market leadership appeared to rotate within equities, with investors favoring software over semiconductors and energy.
What drove the move
Markets gave up some early momentum, leaving stocks mixed as the Nasdaq 100 declined to its lowest level in roughly two and a half months. The main drag came from semiconductor and AI-infrastructure equities, as investors appeared to rotate away from that segment of the market.
Separately, geopolitical developments contributed to softer energy pricing. According to the report, the U.S. and Iran avoided direct escalation for a third straight day, with U.S. officials indicating diplomacy was being given room. Data in the article linked that easing to a sharp drop in crude, which in turn supported equities and bonds earlier in the session before leadership later diverged.
In economic releases, the report pointed to strength in U.S. demand for capital goods. U.S. June capital goods new orders excluding defense aircraft rose 0.9% month over month, beating the 0.7% expectation cited in the article. That supported the broader “growth is holding up” narrative at a time when earnings season is in focus.
Market reaction across sectors and standout stocks
Semiconductors and AI-exposed names led the downside. The iShares Semiconductor ETF fell more than 3% to a one-week low, reflecting broad pressure across the group. The article cited double-digit weakness in Sandisk, along with declines in several large semiconductor and memory-related names including Advanced Micro Devices and Western Digital. Additional declines were reported across a wider set of chip-related companies, including both equipment and memory supply-chain names.
Energy shares moved lower alongside crude oil. According to the report, a more than 6% drop in oil dragged producers and service providers, with multiple large U.S. energy names down more than 1% to more than 2%.
Not all sectors tracked lower. Software shares rose, providing a partial offset to chip weakness. The report highlighted strong gains in Workday and Atlassian, along with broad-based strength across enterprise software, including Autodesk, Oracle, and Salesforce. Microsoft was also up more than 2% in the article, suggesting that earnings sensitivity did not translate uniformly into weakness across all tech.
Airlines and cruise operators also gained as lower fuel expectations supported the group. The report cited gains in multiple U.S. carriers and cruise line operators, aligning with the crude move.
Earnings and investor positioning
The week’s earnings calendar remained a key driver of how investors positioned. The article said markets were watching results from major technology companies, including Amazon.com, Meta Platforms, and Microsoft. According to Bloomberg Intelligence forecasts referenced in the report, Q2 earnings are expected to rise about 23%, compared with the strong Q1 growth rate cited there.
AI spending was described as a major contributor to earnings growth, with AI infrastructure stocks expected to account for nearly 60% of the S&P 500’s earnings-per-share growth in the quarter, according to the report. The article also cited Bloomberg data showing that, at the time of writing, a large majority of S&P 500 companies that had reported so far beat estimates.
While that backdrop supported the equity outlook, the day’s sector dispersion suggested investors were actively reassessing where AI exposure is most durable. Chip stocks fell despite the broadly constructive earnings narrative, pointing to a more nuanced market interpretation of near-term demand, margins, and valuation.
On the policy front, the article noted that markets were pricing a rate-hike probability for the next Federal Open Market Committee meeting and were also looking toward the ECB. The report cited that investors were discounting a meaningful chance of a 25-basis-point increase at the next U.S. meeting, while also assigning a high probability to an ECB hike at its September meeting.
Bigger picture: oil, inflation expectations, and global rates
Rates markets reflected the energy move. The report said the 10-year Treasury yield fell about 2.4 basis points to 4.653% after crude dropped sharply. It also cited lower breakeven inflation expectations to a three-week low, linking the Treasury move to easing inflation outlooks.
European bond yields declined alongside the U.S. move, with German bund and UK gilt yields both reported lower on the day. The article also referenced European data and commentary: Germany’s IFO business confidence reading rose to a five-month high, and an ECB governing council member said at least one more rate increase may be needed to keep inflation risks contained. Market pricing for the next ECB decision was also discussed in the report.
Overseas equities were generally higher in the article, including gains in the Euro Stoxx 50 and Japan’s Nikkei, while China’s Shanghai Composite was reported up as well.
Looking ahead, investors will likely focus on the next set of megacap earnings and guidance updates, especially for companies tied to AI infrastructure. The path of crude oil and Middle East developments remain a near-term risk to inflation expectations and equity positioning, while upcoming U.S. and European central-bank decision points will continue to shape rates expectations.
