U.S. stock indexes fell sharply on Tuesday, with the S&P 500 closing down 1.44%, the Nasdaq 100 down 3.29%, and the Dow Jones Industrial Average down 0.09%. The pullback was driven by renewed concerns about valuations in chipmakers and memory stocks—key beneficiaries of the artificial-intelligence boom—after global selling intensified in the sector.
While equities later pared losses amid signs of strength in U.S. manufacturing, bond yields moved the other way as investors sought safety. U.S. 10-year Treasury yields fell to 4.493% after a surge in demand for government debt, alongside cooling inflation expectations.
Key takeaways
- Index move: The S&P 500 fell 1.44% while the Nasdaq 100 dropped 3.29%.
- Catalyst: Heavy selling in semiconductor and AI-infrastructure stocks reflected worries that current spending and valuations may not be matched by future returns.
- Rates reaction: 10-year Treasury yields declined to 4.493% as risk-off flows boosted demand for Treasuries.
- Macro inputs: A stronger-than-expected U.S. S&P Global manufacturing PMI helped offset softness in the Richmond Fed survey.
- Implication: Investors are increasingly balancing AI-led growth exposure against higher sensitivity to rate expectations and the sustainability of earnings assumptions.
What drove the selloff in equities
Chipmakers and memory stocks sold off broadly, dragging technology-heavy benchmarks lower. The semiconductor slide aligned with concerns about elevated valuations across the AI trade, as investors questioned whether future returns will justify the level of spending already reflected in market expectations.
The sector pressure showed up in exchange-traded products and marquee names. The iShares Semiconductor ETF SOXX closed down more than 8%. Individual stocks including Sandisk SNDK and Micron Technology MU fell more than 12% and 13%, respectively.
In the Dow, International Business Machines IBM was up more than 5%, helping limit losses for the index even as broader equity weakness intensified elsewhere.
Overseas weakness and liquidation effects
According to market coverage, the sharp decline began in Asia. Japan’s Nikkei Stock Average fell more than 3%, while South Korea’s Kospi ended down more than 10%. The report also noted foreign investors offloaded more than $2.5 billion of Kospi shares.
Semiconductor-heavy markets were hit particularly hard. South Korea’s SK Hynix and Samsung Electronics both fell more than 12%, and the move was described as contributing to forced liquidation. That selling was further amplified by activity linked to leveraged exchange-traded funds tracking the two chip firms, according to the article.
Macro data: growth improved, but policy expectations stayed in focus
After reaching their worst levels earlier, U.S. indexes recovered some ground during the session as economic signals from surveys suggested resilience. The June S&P Global manufacturing PMI unexpectedly rose by 0.6 to 55.7, beating expectations for a decline to 54.6 and marking the strongest reading in four years.
Still, other regional data pointed to weakness. The June Richmond Fed manufacturing survey current conditions fell 9 points to 4, according to the report, coming in weaker than expectations of 8.
Interest-rate pricing also remained central. The article said markets were discounting a 36% chance of a 25 basis point rate hike at the next FOMC meeting on July 28–29, highlighting that investors continued to weigh the implications of uneven growth data against Fed policy.
What happened to Treasuries and global bonds
U.S. Treasuries benefited from the equity selloff as investors shifted toward perceived safety. According to the report, September 10-year Treasury futures settled higher, and the 10-year Treasury yield fell 1.6 basis points to 4.493%.
Easing inflation expectations supported the move. The 10-year breakeven inflation rate dropped to a six-month low of 2.210%, and the article cited strong demand for the Treasury’s $69 billion 2-year note auction, which posted a bid-to-cover ratio of 2.64 versus a 10-auction average of 2.61.
However, gains were contained by a mix of factors. The June S&P Global manufacturing PMI’s strength was described as a hawkish input for Fed policy, while the article also flagged upcoming Treasury supply. The Treasury is set to auction $211 billion of Treasuries and floating-rate notes during the week.
In Europe, government bond yields also moved lower on Tuesday. The article cited Germany’s 10-year bund yield dropping to a 2.5-month low of 2.904% and closing down 3.3 basis points at 2.919%, while the 10-year UK gilt yield fell 5.4 basis points to 4.754%.
Individual stock moves and company headlines
In addition to broad semiconductor weakness, several single-name developments stood out. Primoris Services PRIM fell more than 21% after cutting its full-year profit outlook to a range of $2.05 to $2.60, down from a prior estimate range of $4.80 to $5.00. Edgewell Personal Care EPC rose more than 15% after rejecting an unsolicited takeover offer from Yellow Wood Partners that was described as too low at $30 per share.
Analyst-driven moves also contributed to the day’s dispersion. IBM IBM rose more than 5% after JPMorgan Chase upgraded it to overweight from neutral with a price target of $291. CDW CDW climbed more than 5% following a Morgan Stanley upgrade to overweight from equal weight with a price target of $170. GE HealthCare Technologies GEHC gained more than 5% after RBC Capital Markets initiated coverage with an outperform rating and a price target of $80.
Avis Budget Group CAR rose more than 2% after agreeing to a settlement with Pentwater Capital Management under which Pentwater will pay Avis $650 million to resolve a lawsuit seeking recovery of short-swing profits.
What to watch next
With the market still focused on AI-related valuation risk and shifting rate expectations, investors will likely monitor upcoming economic releases and further central-bank messaging. The next FOMC meeting on July 28–29 remains a key benchmark for rate expectations, while additional inflation and growth data could quickly change Treasury yields and, in turn, pressure or support growth stocks.
