US stocks moved lower on the day, with the S&P 500 falling toward a one-month low and the Nasdaq 100 dropping to a three-month low. The decline was driven by weakness in chipmakers and AI infrastructure names, while crude oil surged and Treasury yields rose ahead of the conclusion of a two-day Federal Reserve policy meeting later this afternoon.
In parallel, investors continued to weigh rising geopolitical tensions in the Middle East, after IRGC-linked claims of strikes involving US targets in Jordan and activity tied to the Strait of Hormuz intensified the market’s risk premium for energy prices. With Microsoft and Meta Platforms due to report after the close, investors are also monitoring whether the latest round of megacap earnings can translate heavy AI-related spending into convincing results.
Key takeaways
- Price move: The S&P 500 fell 0.71%, the Dow Jones Industrial Average dropped 1.53%, and the Nasdaq 100 declined 0.98%.
- Catalyst: Chip and AI infrastructure stocks sold off as crude oil jumped more than 7%, pushing bond yields higher into the Fed decision.
- Market implication: Higher energy prices and a firmer rate backdrop pressured growth-sensitive sectors ahead of major earnings later today.
- Watch item: The Fed’s end-of-meeting decision is the immediate driver for how investors frame duration risk and earnings multiples.
What drove the selloff
Stocks slid as investors rotated away from technology exposure tied to the AI supply chain. The Philadelphia Stock Exchange Semiconductor Index declined to a 2.5-month low and was down more than 3%, reflecting broad pressure across chip and AI-related infrastructure companies.
Geopolitical developments amplified the move by lifting crude oil. September WTI crude rose more than 7% after IRGC-linked statements claimed ballistic missile attacks on a US airbase and command center in Jordan, alongside claims involving tankers near the Strait of Hormuz. The US and Saudi Arabia also launched a joint attack on “Iran-aligned terrorists” in Iraq following direction attributed to the IRGC.
As a result, energy inflation expectations climbed. The report also highlighted that the US maintains a blockade of Iranian oil shipments in the Persian Gulf, while diplomatic efforts to reopen the Strait of Hormuz appeared stalled after Iranian comments about an Oman-proposed routing arrangement.
Market reaction: rates and sector performance
Bond markets responded to the oil spike. The 10-year Treasury yield rose about 4 basis points to 4.64%, with T-note futures showing pressure during the session. The article also cited long liquidation and end-of-positioning effects as the Fed meeting approached, alongside the implication that higher crude prices can raise inflation expectations and complicate the policy path.
Equities in rate-sensitive areas faced additional headwinds. The selloff extended into shipping and airlines—sectors exposed to fuel costs—where several trucking and freight names fell more than 1% to 7% and airline stocks were broadly lower, consistent with investor concern over higher operating expenses.
By contrast, energy producers and service providers generally moved higher as crude strengthened, with multiple companies up more than 1% and some gaining more than 3% to 4% in the session. This divergence underscored how the day’s macro tape—oil higher, yields higher—was influencing sector leadership.
Earnings and the Fed: what investors are watching next
Investors are positioned around two major catalysts: the Fed meeting conclusion and a focused earnings slate from megacap technology companies. The article noted that policymakers are expected to keep interest rates unchanged at the end of the two-day FOMC meeting.
Attention also turns to whether the earnings results justify the pace of AI-related spending. The report said Microsoft and Meta Platforms are scheduled to report after the close, with additional large-cap earnings coming later, including Amazon.com and Apple on Thursday. Bloomberg Intelligence projections cited in the piece suggested that second-quarter earnings could rise about 23%, coming close to the strong first-quarter growth rate referenced in the article, with AI spending expected to contribute a substantial share of S&P 500 earnings-per-share growth.
For markets, the rate path remains central. The article stated that traders were pricing a 34% chance of a 25-basis-point rate hike at the conclusion of today’s FOMC meeting. With yields already reacting to crude higher, any shift in policy language could quickly change how investors value longer-duration growth stocks into the earnings season.
Macro signals and broader markets
Data also contributed to the backdrop. US mortgage-related indicators in the article showed a decline in MBA mortgage applications for the week ended July 24, alongside higher rates: the average 30-year fixed mortgage rate rose to a level described as an 11.5-month high, supporting the view that the higher-yield environment is filtering through to interest-rate-sensitive demand.
Overseas, the article reported mixed trading. The Euro Stoxx 50 fell 0.73%, China’s Shanghai Composite closed up 0.40%, and Japan’s Nikkei 225 ended down 1.49%, reflecting a global market split that mirrors differing expectations for the rates outlook and risk appetite.
After the close, investors will look for confirmation that earnings from Microsoft and Meta can offset today’s macro pressure from oil and yields. Ahead of that, the immediate focus is the Fed decision and its accompanying guidance, followed by broader megacap results later this week and continued confirmation of how higher energy costs may affect growth-sensitive sectors.
