The semiconductor sector faced significant selling pressure, dragging the Nasdaq Composite down by over 1%, while the S&P 500 index fell for a third consecutive session. US stocks closed lower across the board on Tuesday (18th).
US stocks closed lower across the board on Tuesday (18th) as stalled US-Iran negotiations and persistently high international oil prices fueled market concerns that inflationary pressures might not recede quickly, driving up global government bond yields. The yield on the US 30-year Treasury note hit a 19-year high. Simultaneously, the semiconductor sector encountered notable selling pressure, dragging the Nasdaq Composite down by over 1% and causing the S&P 500 index to decline for a third straight day.
The Dow Jones Industrial Average fell 116.38 points or 0.22%, closing at 53,343.40 points; the S&P 500 index dropped 0.69% to 7,691.76 points, marking its third consecutive day of losses; the Nasdaq Composite Index plunged 1.33% to 26,289.71 points; and the Philadelphia Semiconductor Index plummeted 628.54 points or 4.98%, ending at 11,992.47 points.
Semiconductor Stocks Sold Off: SanDisk, Seagate Plunge Over 9%
According to a CNBC report, technology stocks were one of the main sources of pressure on Tuesday's market, with semiconductor and data storage-related stocks suffering particularly steep declines.
TSMC's ADR tumbled 4.07%. Western Digital slumped about 7%, SanDisk fell 9%, chipmaker Marvell Technology also dropped nearly 8%, and Seagate Technology's decline exceeded 9%. The wave of selling in tech stocks weighed heavily on the Nasdaq's performance.
Aside from the tech sector's retreat, the rapidly rising yields in the bond market have prompted investors to reassess the valuation of risk assets.
The yield on the US 30-year Treasury note climbed to its highest level in 19 years on Tuesday, and this bond market sell-off is not confined to the US. Japan's 10-year government bond yield rose to a 30-year high, Germany's 30-year bond yield hit its highest since 2011, and France's 30-year bond yield also reached a level not seen since 2008, indicating simultaneous pressure on long-term bonds globally.
Stalled US-Iran Talks, High Oil Prices Renew Market Fears of Inflation Resurgence
A major reason for the continued rise in bond yields recently is investor concern that persistently high energy prices could rekindle inflation.
As negotiations between the US and Iran to end the war have seen no breakthrough, uncertainty in the Middle East continues to support oil prices. US crude oil futures rose about 0.5% on Tuesday, following gains on Monday, reaching $84.94 per barrel.
Markets had hoped that the US and Iran might reach an agreement to end the conflict through talks, but those hopes dimmed further on Tuesday. US President Donald Trump stated on his social media platform Truth Social that the US is not currently engaged in any "negotiations or dialogue" with Iran and has no such meetings planned, while emphasizing that the US naval blockade remains "fully and effectively enforced."
Trump even warned on Monday that the US might attack Oman if it interfered with US efforts in the Iran negotiations, deepening market worries about a potential escalation of tensions in the Middle East.
Corporate Earnings, AI Theme Provide Support, but Analysts Warn of Potential Correction
Despite rising bond yields and geopolitical risks, the US stock market has been buoyed this year by strong corporate earnings and the investment boom in artificial intelligence (AI). However, as yields continue to climb, concerns are emerging that investors may be overly ignoring the pressures stemming from the high-interest-rate environment.
Bill Fitzpatrick, Portfolio Manager at Logan Capital Management, noted that the market is currently choosing to overlook challenges related to bond yields, instead focusing on the positives of robust corporate profits and AI developments. "But at some point, we could very easily face a sell-off."
He further pointed out that the factors driving bond yields higher "aren't going to suddenly disappear tomorrow," suggesting that concerns over high oil prices, inflation, and interest rates could continue to weigh on the US stock market's future trajectory.
