US stock futures pared significant losses on Tuesday, with the S&P 500 recovering from an early decline of 0.9% to trade down just 0.1% at 7,380 points as of 13:40 ET. The Nasdaq Composite shed 0.94% to 26,032.60 points, recovering from a slide of as much as 1.5%. The Dow Jones Industrial Average declined 0.46% to 49,573.69 points, cutting into a decrease of as much as 0.9%. According to Investing.com, technology stocks erased their decline ahead of industry bellwether Nvidia's quarterly earnings scheduled for Wednesday. Nvidia shares slipped 1% ahead of earnings while other chip stocks faced continued pressure, with Micron Technology falling 1.7% and Seagate Technology dropping 3%. As Michael O'Rourke, chief market strategist at Jones Trading, noted, "Cloud companies are under pressure after Google and Blackstone announced a joint venture to create data centers using Google TPUs," while memory, storage, and semiconductor stocks are bouncing back following yesterday's pullback.
US Treasury yields remained elevated with the 10-year yield hitting the highest level since January 2025 at 4.6653%, continuing to weigh on equities and other risk-sensitive assets. As Jeff Schulze, head of economic and market strategy at ClearBridge Investments, explained to Reuters, "I do think tightening financial conditions driven by rising rates is the number one driver of the recent sell-off. When you look at the 10-year Treasury, historically, 4.5% has been the line in the sand that's created real anxiety and we've clearly moved through those thresholds." Inflation concerns and fears that major central banks may need to maintain tighter policy for longer are beginning to challenge the AI-driven rally that has supported equities in recent months. Attention is now turning to minutes from the Federal Reserve's latest meeting, due on Wednesday, for clues on whether policymakers are becoming less committed to an easing bias. The S&P 500 extended its recovery from the 6,310 low to the 7,515 record high before easing back, with the index holding above key moving averages while support is seen around 7,340 and the 20-day moving average near 7,270.
The decline comes as US President Donald Trump announced he had suspended a planned strike on Iran scheduled for Tuesday following appeals from Saudi Arabia, Qatar, and the UAE. Trump added that the Gulf nations believed a deal with Tehran acceptable to Washington could still be achieved. Iran's state media reported on Tuesday that Tehran had sent a peace proposal to the U.S. which would stop hostilities in all fronts their conflict, including in Lebanon, and seek reparations for damage caused by the conflict. The proposal also calls for U.S. forces to exit areas close to Iran, as well as the removal of sanctions, the unfreezing of funds, and the end to an American blockade of Iranian ports. According to Reuters, citing a Pakistani source, Islamabad had shared Iran's proposal with the U.S., with Pakistan serving as a frequent intermediary between both sides since the conflict began in late February. However, Trump warned that he was "an hour away" from striking Iran on Monday before receiving the request for more time, stating he was going to give Iran "two or three days" to come to the table. Markets remain skeptical over the prospects for a near-term resolution given the lack of tangible progress towards ending the conflict.
Oil prices fell on Tuesday after President Trump paused a planned attack on Iran to allow more time for negotiations. Brent crude futures dipped 1.1%, but were still above $110 a barrel after U.S. President Donald Trump said on social media on Monday that he had held off on a planned military strike against Iran, scheduled for Tuesday, while negotiations continued. Supply concerns nevertheless remain elevated, with US strategic petroleum reserves falling by a record 9.9 million barrels last week, leaving stockpiles at 374 million barrels, the lowest level since July 2024. According to Kotak Securities, concerns surrounding Iran's nuclear programme and the ongoing blockade continue to support elevated risk premiums in global oil markets. Meanwhile, U.S. Treasury Secretary Scott Bessent noted several factors that play a part in financing terrorism, including shell companies in Europe, shadow banking networks across the Middle East, and drug cartels in the west. Bessent announced that "Treasury has deprived the Iranian regime of revenue for their weapons programs, terrorist proxies, and nuclear ambitions," including disruption of tens of billions in projected oil revenue and freezing nearly half a billion in regime-linked cryptocurrency.
Among individual stocks, Home Depot rose modestly after reporting earnings and revenue ahead of expectations, posting earnings per share of $3.43 on revenue of $41.77 billion, both slightly above forecasts. Blackstone and Alphabet shares advanced after the former announced plans to invest $5 billion in equity capital into a new artificial intelligence infrastructure company in partnership with Google. However, chip stocks remained under pressure, with memory-related names extending recent losses. As Paul Stanley, chief investment officer at Granite Bay Wealth Management, noted, "Nvidia's earnings will help set the tone for a stock market that is in need of its next catalyst after an incredible run since the March lows." The S&P 500 posted 13 new 52-week highs and 21 new lows while the Nasdaq Composite recorded 30 new highs and 143 new lows, with declining issues outnumbering advancers by a 2.49-to-1 ratio on the NYSE and 1.82-to-1 ratio on the Nasdaq. The S&P 500 software index (.SPLRCIS) slipped 0.3%, after gaining roughly 5% over the previous three sessions, while Healthcare (.SPXHC) was a rare bright spot and led sector gains by rising 1.3%. Cloud firm Akamai Technologies fell 4.9% after announcing a $2.6 billion convertible bond offering.
