US stock markets experienced a broad sell-off on Wednesday, with major indices closing sharply lower. The downturn was fueled by escalating geopolitical tensions in the Middle East and a continued retreat from high-flying technology stocks.
The S&P 500's technology sector officially entered correction territory, closing more than 10% below its record high from early June. The Philadelphia Semiconductor Index tumbled nearly 4%, leading the market lower.
Major Market Moves
The Dow Jones Industrial Average plunged 953.33 points, or 1.87%, to close at 49,918.78. The Nasdaq Composite fell 1.98% to 25,169.50, and the S&P 500 dropped 1.62% to 7,266.99. The CBOE Volatility Index (VIX), often called the fear gauge, surged 12%.
Key Stock Performers
Semiconductor stocks faced significant pressure. Broadcom (ASX: AVGO), Marvell Technology (ASX: MRVL), Taiwan Semiconductor Manufacturing Company (TSMC) (ASX: TSM), and Advanced Micro Devices (AMD) (ASX: AMD) all fell more than 4%. Nvidia (ASX: NVDA) declined 3.73%.
The memory sector also weakened, with Seagate Technology (ASX: STX) dropping 5.34% and Micron Technology (ASX: MU) falling 4.70%. SanDisk (ASX: SNDK) edged down 0.20%.
Most major tech stocks closed in negative territory. While Apple (ASX: AAPL) gained 0.35%, Microsoft (ASX: MSFT) fell 1.50%. Meta (ASX: META), Google (ASX: GOOGL), Amazon (ASX: AMZN), and Tesla (ASX: TSLA) all lost over 2%.
The industrial sector was the worst performer, slumping 3.4%. Freight companies like XPO (ASX: XPO), J.B. Hunt Transport Services (ASX: JBHT), and Old Dominion Freight Line (ASX: ODFL) declined after Amazon announced an expansion of its US less-than-truckload shipping business.
Super Micro Computer (ASX: SMCI) plummeted 28% after announcing a $7 billion equity-linked financing plan.
As money rotated out of high-valuation tech stocks, some laggards gained. Coca-Cola (ASX: KO) rose over 2%, hitting a new all-time high.
The Nasdaq Golden Dragon China Index dipped 0.28%. Alibaba (ASX: BABA) and Baidu (ASX: BIDU) fell more than 3%, while JD.com (ASX: JD) dropped 0.97% and Pinduoduo (ASX: PDD) slipped 0.13%. NetEase (ASX: NTES) bucked the trend, rising over 4%.
Market Drivers and Commentary
Economic data showed US headline CPI rose above 4% year-over-year in May for the first time in three years, influenced by energy prices. Core CPI, which excludes food and energy, increased 0.2% month-over-month and 2.9% year-over-year, slightly below expectations.
Geopolitical tensions took center stage. The US President stated that the US would launch another "very severe" strike against Iran, criticizing negotiations as taking too long. An Iranian military spokesperson warned of a "more severe, stronger, and more destructive" response to any US threat.
Market strategists noted the ongoing profit-taking in the tech sector. One analyst stated that investors have now priced in potential future rate hikes following recent data and are concerned about Middle East conflict, which could persist into late summer or early fall.
Another investment strategist commented that the recent rally had been heavily concentrated in memory and semiconductor stocks, driving the market higher. She noted that the sharp short-term gains had left the sector overextended, making a pullback inevitable due to overheated sentiment, though the fundamental outlook remained uncertain.
US Treasury yields moved higher, with the 2-year yield rising 1 basis point to 4.126% and the benchmark 10-year yield climbing 1.5 basis points to 4.541%.
Commodities in Focus
Rising Middle East tensions propelled oil prices sharply higher. The WTI crude oil front-month contract gained 2.07% to settle at $90.03 per barrel, with gains extending in after-hours trading. The Brent crude front-month contract rose 1.80% to $93.10 per barrel.
Precious metals retreated. The COMEX gold futures contract for June delivery fell 3.56% to $4,108.20 per ounce, while COMEX silver futures declined 0.76% to $64.60 per ounce.
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