Wall Street retreated on Wednesday as higher global bond yields and firmer crude oil prices weighed on risk assets, sending the Nasdaq 100 down sharply while the S&P 500 and Dow slid to fresh two-week lows. The S&P 500 fell 0.61%, the Dow Jones Industrial Average declined 0.10%, and the Nasdaq 100 dropped 1.76%, with E-mini S&P futures down 0.68% and September E-mini Nasdaq futures off 1.88%.
The pullback was tied to a jump in Treasury yields following crude’s rise to a three-week high and renewed inflation concerns linked to Middle East tensions. While equities later recovered some of their worst levels as yields slipped from peaks, the damage to interest-rate-sensitive segments—particularly semiconductor and AI infrastructure stocks—was still evident.
Key takeaways
- Price move: The Nasdaq 100 fell 1.76%, while the S&P 500 dropped 0.61% and the Dow eased 0.10%.
- Catalyst: Surging crude oil and global bond yields pressured growth stocks, especially chips and AI-related infrastructure.
- Rates implication: Yields only partially cooled after topping out, leaving investors focused on inflation and the path of monetary policy.
- Sector split: Software shares moved higher even as semiconductors sold off.
- Next watch: Traders are positioned around upcoming central-bank meetings and the next wave of earnings and economic data.
What drove the selloff
Rising oil prices fed directly into the fixed-income complex. WTI crude climbed to a three-week high after a vessel departing the Strait of Hormuz was struck by an unknown projectile, renewing concerns about disruption risk in the region. President Trump said he is not interested in extending the expired Iran agreement, and remarks about US naval pressure on Iranian ports added uncertainty around near-term de-escalation.
As crude pushed higher, market pricing turned more inflation-sensitive. The 10-year Japan JGB yield was reported near a 30-year high, the 10-year German Bund yield hit a 15-year high, and the US 10-year Treasury yield rose to a 1.5-year high of 4.75%. Although Treasuries later improved—down to 4.71% after previously reaching 4.746%—equity markets largely had already repriced the rate outlook.
Economic releases in the US were mixed. July housing starts fell 12.4% month over month to 1.239 million, weaker than expectations, while July building permits increased 5.0% month over month to a five-month high. Data elsewhere showed the July import price index excluding petroleum rose 0.3% month over month, and manufacturing production was up 0.2% month over month in line with expectations. Pending home sales fell 2.3% month over month.
Market reaction: yields, futures, and leadership
With stocks moving off their lows only after yields eased from session highs, investor focus stayed on the interaction between inflation, rates, and equity valuation. The selloff was particularly pronounced in the semiconductor and AI infrastructure complex. Data from the session showed the iShares Semiconductor ETF fell more than 5%, while major chip-related names such as Marvell, Sandisk, Seagate, and ARM were each down more than 7% to 8%, and several other large-cap semiconductor and equipment names dropped more than 4% to 6%.
In contrast, software stocks offered support to the broader tape. Intuit rose more than 4% to lead Nasdaq-100 gainers, while Adobe, Autodesk, Atlassian, and Salesforce were up more than 3%. Additional strength appeared in Thomson Reuters, ServiceNow, and IBM.
Corporate developments among movers
Single-stock news also shaped the day’s dispersion. Klarna Group shares slid more than 19% after cutting its full-year revenue forecast to a range of $4.08 billion to $4.16 billion, below its prior outlook. Fabrinet fell more than 19% despite reporting better-than-expected fourth-quarter EPS, with Datacom sales disappointment cited.
Meta Platforms was down more than 3% as the company faced a jury trial in federal court over allegations that Facebook and Instagram were designed to encourage compulsive use among young users. Amylyx Pharmaceuticals surged more than 48% after reporting that its GLP-1 receptor met a primary endpoint in a late-stage trial involving low blood sugar following bariatric surgery.
Energy and industrial deal flow helped lift parts of the market as well. Targa Resources gained more than 7% after signing a 20-year integrated midstream agreement with ExxonMobil. Several companies also moved on analyst actions, including Duolingo after a D.A. Davidson upgrade, Bath & Body Works following a Citigroup upgrade, and Tapestry after Daiwa Securities raised its rating.
Bigger picture: earnings support versus policy uncertainty
While the rate-driven pressure dominated the day, earnings expectations provided a counterweight. According to Bloomberg Intelligence, the S&P 500 is tracking for nearly 32% earnings growth in the second quarter, well above a projected 23% and significantly faster than average post-2013 growth rates outside the COVID period. Bloomberg data also indicated that, so far, 85% of the 456 S&P 500 companies that reported second-quarter results beat estimates. The same report pointed to AI spending as a key driver, with AI infrastructure stocks expected to contribute nearly 60% of S&P 500 second-quarter earnings-per-share growth.
At the same time, markets continue to price policy risk. The session reflected positioning around the next Federal Reserve meeting, with traders discounting a 35% chance of a 25 basis-point rate hike at the September 15–16 meeting. Overseas, European policy expectations also moved front and center, with markets pricing a 95% likelihood of a 25 basis-point ECB hike at its September 10 meeting.
Bond market developments stayed tightly linked to equities: US Treasuries received some support after stocks slid and safe-haven demand increased, alongside additional sensitivity to housing data that ran weaker than expected. In Europe, commentary from ECB Chief Economist Philip Lane suggested inflation could remain well above the bank’s 2% target, and that view was consistent with higher government bond yields reported during the session.
Investors will likely watch how quickly Treasury yields stabilize after crude’s geopolitical headlines and whether oil remains supported by Strait of Hormuz supply risk. On the calendar, next steps include the upcoming Federal Reserve decision cycle and additional second-quarter earnings, including reports from Amer Sports, Home Depot, Jack Henry & Associates, Keysight Technologies, and Toll Brothers.
