US stock markets closed lower on Tuesday, July 8th. The Dow Jones Industrial Average retreated from its record high. Sector rotation continued, with investors appearing to once again withdraw from artificial intelligence-related stocks. Rising tensions in the Middle East pushed oil prices higher.
The Dow fell 131.35 points, or 0.25%, to close at 52,924.56. The Nasdaq Composite dropped 302.47 points, or 1.16%, to 25,818.69. The S&P 500 declined 33.67 points, or 0.45%, to 7,503.76.
Shares of Micron Technology closed down 4.7%, with KLA, Marvell Technology, Broadcom, and AMD also moving lower. The VanEck Semiconductor ETF (SMH) fell more than 5%.
Mike Bailey, Director of Research at FBB Capital Partners, stated, "Expectations are already high, and the fundamentals are struggling to meet these extremely high demands. This is the reason for today's decline. I expect the rotation we are seeing to continue."
Investors pivoted to key stocks in other market sectors, such as healthcare, financials, and large-cap tech. Shares of Eli Lilly rose 2%, while JPMorgan Chase and Microsoft also saw gains. Walmart shares also moved higher after the company announced price cuts on products including ground beef and Coca-Cola.
Adding to the subdued market sentiment, oil prices climbed following an attack by Iran on a Qatari liquefied natural gas tanker near the Strait of Hormuz. The international benchmark Brent crude futures settled 3% higher at $74.16 per barrel. US West Texas Intermediate crude futures gained nearly 3% to $70.44. Oil prices extended gains after the market close following the US revocation of a waiver that had allowed Iranian oil sales.
The downward pressure on AI-related trades in US markets on Tuesday originated in the Asia-Pacific session, where South Korea's Kospi index fell nearly 5% as memory chipmaker Samsung Electronics dropped almost 7%. The company reported a significant jump in second-quarter profit, but concerns over spending and demand overshadowed the results. In Europe, the Stoxx 600 index declined by 0.5%.
Adam Crisafulli of Vital Knowledge wrote, "The market's reaction to Samsung reveals one of the biggest risks facing the market in the coming weeks: Q2 earnings results may be quite strong in absolute terms... but unlike the Q1 earnings season, current expectations are very optimistic (and the S&P 500 is about 1000 points higher than before Q1 earnings were released), meaning the bar is set quite high."
According to sources, DeepSeek is developing its own AI chip, which also weighed on sentiment. This move could reduce the company's reliance on semiconductors from firms like Nvidia and Samsung.
Meanwhile, SpaceX fell 6% on Tuesday as it entered the Nasdaq-100 index. The stock declined despite generally bullish analyst sentiment. Several Wall Street firms initiated coverage of the stock with positive ratings and price targets, including Morgan Stanley and Raymond James.
FBB Capital Partners' Research Director Bailey noted that the stock's drop was "a signal of some modest risk-off positioning" as the company "is trying to become a player in the AI space."
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