Wall Street Hit by Tech Stock Sell-Off Amid Interest Rate Concerns

Stock markets in the United States experienced a downturn on Tuesday as technology stocks, witnessing a sell-off beginning in Asia, saw declining values. The dip comes as investors express concern over potential interest rate increases by the end of the year.

The S&P 500 dropped by 0.9%, despite previously recording 11 weekly gains in 12 weeks, primarily driven by technology shares. Meanwhile, the Dow Jones Industrial Average, less impacted by technology stocks, decreased by 8 points, marking a fall of less than 0.1% around mid-morning Eastern time. The Nasdaq composite saw a more pronounced decline, falling by 1.4%.

Asian markets were not spared, observing declines across the region. South Korea’s Kospi index, in particular, fell by 10%. European markets followed suit, also showing negative performance. Tech stocks were particularly heavy on the market, with many having experienced value surges amidst the artificial intelligence boom.

Companies such as Micron Technology and Nvidia lost 9.7% and 2.6%, respectively. South Korea’s Samsung Electronics experienced a 12.3% slump.

SpaceX, despite showing volatility in early trading, managed an increase of 1.8%. The company, active in space exploration and AI, had a successful market debut recently. It plans to issue bonds to support its AI development plans.

Investor concerns over interest rate hikes, likely to occur this year, have dampened the rapid rise in AI-related stocks. While the tech sector within the S&P 500 posted a 27% gain over three months and an 18% increase for the year, higher interest rates threaten economic growth and spending.

The Federal Reserve has hinted at a potential rate increase before year-end. The likelihood of this rise, anticipated by Wall Street, reached 85%, up from 60% a week earlier. Meanwhile, the yield on the 10-year Treasury decreased slightly to 4.49%, whereas the 2-year Treasury fell to 4.20%, despite ongoing inflation concerns.

Inflation remains a significant issue, exacerbated by U.S. tariffs and the war with Iran, leading to higher energy and shipping costs. A June report noted a 4.2% rise in consumer prices for May, marking a three-year high. Another report expected this week may indicate inflation climbing further to 4.1%.

Oil prices eased due to U.S.-Iran negotiations. The U.S. crude price dropped 1.7% to $72.60 per barrel, while Brent crude fell by a similar percentage to $76.54. Both remain higher than pre-war levels of around $70 per barrel.

AP Senior Producer Mayuko Ono contributed from Tokyo.