US stocks retreated for a third consecutive day, with the Dow Jones Industrial Average falling 237.72 points (0.48%) to 49,448.40, the S&P 500 dropping 0.75% to 7,347.35, and the Nasdaq Composite sinking 1.11% to 25,801.84. According to The Economic Times, this marks the third straight losing session for all three benchmarks, with the Nasdaq experiencing the steepest decline as technology and AI-linked stocks faced heavy selling pressure. The S&P 500 has shed about 2% during its three-day losing streak, with index decliners beating gainers by about 1.7 times on Tuesday. As reported by Yahoo Finance, the tech-heavy Nasdaq Composite sank roughly 0.8% after falling more than 1% earlier in the session, while the S&P 500 dropped 0.6% on the heels of back-to-back losses.
Semiconductor shares experienced a brutal pullback, with Nvidia Corp. declining 0.94% ahead of earnings results due Wednesday, while AMD fell 4.57%, Intel dropped 3.72%, and Broadcom declined 3.07%. As reported by The Economic Times, large speculators in NDX futures are flipping to their largest net short position since the 2023 low, right ahead of Nvidia earnings. The Philadelphia Stock Exchange Semiconductor Index, known as the SOX, was little changed, down from an earlier gain of 1.9%. The iShares Expanded Tech-Software Sector ETF, ticker IGV, erased earlier gains to fall 1%, while the retail-favored Roundhill Memory ETF, ticker DRAM, rose 0.9% as a proxy for memory stocks. According to Yahoo Finance, the tech sector was a sea of red, with the "Magnificent Seven" stocks — Apple (AAPL), Alphabet (GOOGL, GOOG), Microsoft (MSFT), Amazon (AMZN), Meta (META), Tesla (TSLA), and Nvidia (NVDA) — under pressure too, with Amazon and Tesla seeing the biggest declines.
Treasury yields continued their dramatic ascent, with the 30-year benchmark crossing 5.18%, a level not seen in nearly 19 years, as reported by The Economic Times. The 10-year yield rose past 4.65%, with the leg up in yields driving the cost of capital higher and damping equity valuations. The benchmark 10-year rate (^TNX) climbed above 4.6% again early Tuesday and the 30-year yield (^TYX) briefly hit 5.2%, hitting its highest level since July 2007, as reported by Yahoo Finance. The sell-off in bonds began in late February, when the war in the Middle East broke out, driving oil prices to their highest levels in years. The market has been pricing in a more hawkish Federal Reserve amid elevated energy prices and rising inflation expectations, with expectations of higher borrowing costs putting pressure on stock valuations, particularly for Big Tech players.
West Texas Intermediate crude oil was down about 0.8% at around $108, as reported by NDTV. President Donald Trump threatened to resume strikes on Iran in the coming days, though he had called off a new bombardment of Iran after Saudi Arabia and other Persian Gulf allies wanted more time to pursue diplomacy. While this helped ease oil prices, crude is still up more than 50% since the hostilities began, serving as an inflationary accelerant. A string of last week's economic reports showed inflation re-accelerating, partly driven by elevated oil prices tied to the Iran conflict, with bond vigilantes returning in force to punish governments for inflationary policies. However, as reported by Bloomberg, Goldman international co-head Kunal Shah noted that business hasn't slowed down despite the war, with clients maintaining steady capital deployment and opportunity in the Middle East on the other side of the conflict.
Home Depot Inc. swung from losses to gains after reporting mixed earnings, with comparable sales missing expectations. According to NDTV, Citigroup Inc. fell 2.0% after a downgrade from CFRA's Kenneth Leon, who cited the Iran conflict as potentially triggering tail risks including inflationary pressures and lower consumer confidence. Retail stocks including Lowe's Cos., Target Corp. and TJX Cos. are due to release results on Wednesday, with Target's 26% rally this year raising expectations for upcoming results. The release of Nvidia earnings on Wednesday is the focal point of the week, with investors' expectations for the world's most valuable company sky high and Nvidia serving as a bellwether for the AI trade. As reported by Yahoo Finance, the "Magnificent Seven" stocks declined on Tuesday, with Alphabet (GOOGL, GOOG), Amazon (AMZN), and Microsoft (MSFT) leading to the downside as investors turn their focus on Nvidia earnings. The next two weeks, anchored by Nvidia's earnings and the next round of inflation data, will determine whether this represents a dip that gets bought or the opening chapter of a more significant correction.
