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Stocks slumped on Wall Street Tuesday as a sell-off in big technology stocks spread from Asia back to the U.S. over worries about potentially higher interest rates by the end of the year.
The S&P fell one per cent and is coming off 11 weekly gains out of the past 12, led largely by technology stocks. The Dow Jones Industrial Average fell 0.2 per cent as of 9:53 a.m. ET. The Nasdaq composite fell 1.5 per cent.
Canada’s main stock index, the TSX/S&P, was also down about half a per cent in early trading.
Markets throughout Asia fell, including a 10 per cent slump for South Korea’s KOSPI. Stocks in Europe also slid.
Technology stocks were the biggest weights on the market, especially companies that have seen their values surge amid the frenzy over artificial intelligence technology. Their pricey stock values give them more influence over the broader market’s direction.
Chip companies were among the biggest losers in overnight trading, with Micron and Intel both down more than seven per cent. Qualcomm fell 6.3 per cent.
Micron Technology slumped 9.4 per cent and Nvidia fell 2.4 per cent. Samsung Electronics slumped 12.3 per cent in South Korea.
SpaceX fell 1.8 per cent in a continued reversal from the space exploration and AI company’s soaring stock debut less than two weeks ago. The company also plans to raise money through a bond offering, partly to fund AI development.
Wall Street betting on higher interest rates
Many technology companies have been spending heavily on AI technology. The potential for higher interest rates can stifle future spending and hurt prices for investments. The Federal Reserve has signalled that it could raise interest rates at least once before the end of the year.
Wall Street is betting on a nearly 90 per cent chance the central bank will raise its benchmark interest rate.
Oil prices were nearly unchanged at $77.71 US a barrel for Brent crude, the international standard.
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The yield on the two-year Treasury fell to 4.19 per cent from 4.24 per cent late Monday. Bond yields remain high, though, amid worries about inflation.
High yields in bond markets worldwide caused by worries about inflation are threatening to slow economies, and they have already sent rates higher for mortgages and other kinds of loans.
Asian, European markets fall
Elsewhere, in Europe at midday, France’s CAC dipped 0.6 per cent, while the German DAX fell one per cent. Britain’s FTSE 100 declined 0.5 per cent.
Earlier in Asia, Japan’s benchmark Nikkei 225 lost 3.6 per cent.
“We’ve had eight days of strong markets,” said Neil Newman, head of strategy at Astris Advisory Japan. “Now, it has cooled off a bit.”
The Japanese yen was also flat on Tuesday at 161.58 versus the U.S. dollar, having neared 40-year lows the previous day.
Japanese Finance Minister Satsuki Katayama said on Tuesday she had held an online meeting with U.S. Treasury Secretary Scott Bessent a day earlier to discuss global financial markets, which analysts said suggested an increased risk of official intervention from Tokyo to prop up the yen.
South Korea’s KOSPI tumbled 10 per cent, dropping from previous record highs due to a sell-off in major technology stocks. Signs of greater regulatory scrutiny in the country’s semiconductor sector also added to the hand-wringing.
Hong Kong’s Hang Seng slipped 1.8 per cent, while the Shanghai Composite shed 1.4 per cent.
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