Damian Troise and Alex Veiga
Stocks fell on Wall Street as a sell-off in big technology companies spread from Asia back to the US over worries about potentially higher interest rates by the end of the year.
The S&P fell 1.2 per cent and is coming off 11 weekly gains out of the last 12, led largely by technology stocks. The Dow Jones, which is less influenced by tech stocks, rose 48 points, or 0.1 per cent, in mid-afternoon trade. The Nasdaq composite fell 1.8 per cent. Stocks in Europe also fell.
The Australian sharemarket is set to advance, with futures pointing to gain of 37 points, or 0.4 per cent, at the open. The ASX lost 0.3 per cent on Tuesday, with the technology stock slump hitting Asian markets. South Korea’s Kospi index, a big winner in the AI boom, sank 10 per cent. The Australian dollar was weaker at US69.21¢.
The Wall Street selling largely targeted 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. More US stocks were gaining ground within the S&P 500 than falling, but tech companies were overpowering gains elsewhere.
Micron Technology slumped 12.7 per cent and Nvidia fell 3.4 per cent. Samsung Electronics slumped 12.3 per cent in South Korea.
SpaceX slumped in early trade but was up 2.2 per cent late in the session. The space exploration and artificial intelligence company had a soaring market debut less than two weeks ago. The company plans to raise money through a bond offering, partly to fund AI development.
The growing likelihood of interest rate hikes later this year has helped deflate the massive run-up in AI-related stocks in recent days as traders worry that the higher rates could hamper economic growth.
Those Big Tech gains have been significant, sending major indexes on record-setting runs throughout 2026. Within the S&P 500, the tech sector alone is up 26 per cent just over the last three months and roughly 17 per cent for the year. In Asia, South Korea’s Kospi has nearly doubled so far in 2026, even after Tuesday’s plunge.
Analysts have been warning that high-flying technology stocks could be due for a downturn.
“Viewed through this lens, a period of consolidation is reasonable, in our view, after such a sharp move higher,” wrote Brock Weimer, investment strategy analyst at Edward Jones, in a research note.
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 sees an 85 per cent chance that the central bank will raise its benchmark interest rate this year. That’s versus 60 per cent a week earlier.
The yield on the 10-year Treasury fell to 4.49 per cent from 4.51 per cent late Monday. The yield on the 2-year Treasury fell to 4.19 per cent from 4.24 per cent late Monday. Bond yields remain high, though, amid worries about inflation.
Inflation has been heating up throughout the year. The impact from tariffs helped halt and reverse what had been an easing of inflation growth. The US war with Iran quickly pushed energy prices higher, including gas prices. Higher energy costs have also made shipping more expensive for a wide range of goods, and that has been weighing on businesses and households. A report due Thursday of an inflation measure that is preferred by the Fed is expected to show that inflation rose to 4.1 per cent, in May.
Oil prices have eased amid negotiations between the US and Iran to end their war. The price for a barrel of US crude fell 1 per cent to $US73.09. The price for a barrel of Brent crude, the international standard, fell 0.7 per cent to $US76.97. Prices are still higher from levels of roughly $US70 per barrel before the war began.
AP
The Market Recap newsletter is a wrap of the day’s trading. Get it each weekday afternoon.
