U.S. stock indexes fell sharply on Tuesday, with the S&P 500 down 1.04% and the Nasdaq 100 retreating 2.67%, as investors rotated away from high-expectation segments of the market. The selloff was most pronounced in semiconductors and AI-linked memory and chip stocks after concerns resurfaced about whether valuations can support spending levels tied to the artificial-intelligence boom.
Futures also pointed to continued weakness early in the session, with September E-mini S&P futures down 1.00% and September E-mini Nasdaq futures down 2.66%. The decline began abroad, while later moves in U.S. economic data partially steadied sentiment after the market’s early worst levels.
Key takeaways
- Price move: The S&P 500 fell 1.04% and the Nasdaq 100 dropped 2.67%, while chip-heavy moves dragged sentiment across growth.
- Catalyst: Investors focused on elevated valuations in semiconductors and memory stocks, alongside broader equity weakness that started in Asia.
- Cross-asset implication: Government bonds received some safe-haven bid as yields eased, even as parts of the data calendar suggested policy may remain restrictive.
- Stock-specific signal: Large AI-infrastructure names such as IBM helped limit declines in the Dow, but semiconductor exchange-traded funds and leaders broadly underperformed.
- Data and rates watch: Markets continue to price meaningful uncertainty around the next central-bank decision, with rate expectations shifting after economic releases.
What drove the move
Equity weakness was led by semiconductors and AI infrastructure stocks, with selling concentrated in chipmakers and memory names that have been major beneficiaries of the AI trade. The pressure was reflected in broad sector moves: the iShares Semiconductor ETF, listed as down more than 7%, and multiple large semiconductor companies declining sharply.
The market’s concerns appear tied to valuation risk—investors questioned whether future returns from AI-related spending justify current expectations in the group. That re-evaluation came alongside forced selling dynamics in parts of Asia’s chip complex, where leveraged positioning and ETF-related flows amplified downside for some investors.
Market reaction across stocks and macro data
U.S. indexes moved lower after an initial wave of weakness in Asia. Data cited in the report showed Japan’s Nikkei Stock Average down more than 3% and South Korea’s Kospi closing down more than 10%. The article also noted foreign investors selling more than $2.5 billion of Kospi shares, and sharp declines for South Korean chip leaders including SK Hynix and Samsung Electronics, which both fell more than 12%.
Later in the U.S. session, the declines met some countervailing support from economic indicators. According to the report, the Jun S&P manufacturing PMI unexpectedly rose by 0.6 to 55.7 versus expectations of a decline to 54.6, marking the strongest reading in four years. That improvement helped U.S. markets recover from their worst levels during the day.
Other releases tempered the support. The report said the Jun Richmond Fed manufacturing survey for current conditions fell 9 points to 4, weaker than expectations of 8.
Rates, bonds, and Europe’s policy backdrop
As equities sold off, Treasury markets saw a bid for safe-haven exposure. The report stated September 10-year T-notes rose by seven ticks and the 10-year note yield declined by 2.4 basis points to 4.485%. The article attributed part of the rally in Treasuries to demand for government debt amid sharp global equity declines.
The report also pointed to easing inflation expectations, noting that the 10-year breakeven inflation rate fell to a 6-month low of 2.210%. However, gains in Treasuries were described as limited by the stronger-than-expected manufacturing PMI, which can be viewed as a hawkish input for Fed policy. The report additionally cited supply pressure, saying the Treasury is set to auction $69 billion of 2-year T-notes later in the day.
In Europe, yields were described as moving lower. The report said the 10-year German bund yield dropped to a 2.5-month low of 2.904%, down 4.2 basis points to 2.910%, and the 10-year UK gilt yield fell 5.6 basis points to 4.752%. The article also referenced Eurozone data, including the Jun S&P manufacturing PMI falling 0.3 to 51.3 (below expectations of no change at 51.6) and a rise in the Jun S&P composite PMI to 49.5 (above expectations of 49.2). It cited ECB Chief Economist Philip Lane warning that inflation could remain above the ECB’s goal for “quite some time.”
Notable stock movers
Within the U.S. market, the report highlighted widespread losses across semiconductor and mining names, alongside several company-specific catalysts.
- Semiconductors: Sandisk fell more than 11% and Micron Technology, ON Semiconductor, Applied Materials, Lam Research, KLA Corp, Western Digital, and Qualcomm were among the names down more than 9% or more.
- Mining and metals: Gold and silver were described as falling to 1.5-week lows, pressuring miners such as Coeur Mining and Freeport McMoRan, both down more than 6%.
- Company downgrade: Primoris Services dropped more than 26% after cutting its full-year profit outlook to a range of $2.05 to $2.60 from a previous estimate of $4.80 to $5.00, which the report said also fell well below consensus.
- Management change: Best Buy shares fell more than 3% after announcing its CFO, Bilunas, would step down at the end of July.
- Takeover rejection: Edgewell Personal Care jumped more than 14% after rejecting an unsolicited takeover offer from Yellow Wood Partners, saying the offer price was too low.
- Analyst upgrades: IBM rose more than 5% after JPMorgan Chase upgraded it to overweight; CDW gained more than 5% after Morgan Stanley upgraded to overweight; GE HealthCare Technologies rose more than 3% after RBC Capital Markets initiated coverage; and Target advanced more than 3% following a Wolfe Research upgrade.
- Legal settlement: Avis Budget Group gained more than 4% after entering a settlement agreement with Pentwater Capital Management related to a lawsuit seeking recovery of short-swing profits.
What to watch next
Investors will likely focus on whether the semiconductor-led drawdown stabilizes as the market digests the stronger manufacturing PMI alongside weaker readings from other parts of the manufacturing surveys. With rate expectations still shifting around upcoming meetings—particularly around the next FOMC decision—attention also remains on Treasury supply and additional earnings scheduled for June 23, including reports from Carnival and FedEx.
