Semiconductor Stocks Lead Market Decline as Inflation and Oil Prices Rise

U.S. stocks saw their strong rally stall as traders retreated from risk assets, influenced by accelerating U.S. inflation and rising oil prices due to heightened U.S.-Iran tensions. The S&P 500 fell 0.2%, while the Nasdaq 100 dropped 0.9%. Technology stocks, after weeks of significant gains, led the declines, with the Philadelphia Semiconductor Index notably lower. Qualcomm shares closed down 11%, marking their largest single-day drop since March 2020. Rising geopolitical and inflation risks have added further uncertainty to a stock market already facing pressure from high valuations. U.S. inflation accelerated in April, driven by increases in gasoline and food prices, outpacing wage growth and exacerbating the financial strain on already stretched consumers. "While inflation came in higher than expected, consumer price increases could have been even more pronounced given the Middle East tensions," said Jeff Buchbinder, Chief Equity Strategist at LPL Financial. Market pressure intensified after U.S. President Donald Trump rejected Iran's latest peace proposal and warned that a ceasefire agreement was in jeopardy. Shipping through the Strait of Hormuz remained largely halted, pushing oil prices back above $100 per barrel. However, corporate earnings have so far largely overshadowed these headwinds. Despite overheating in the stock market increasing the risk of a pullback, Wall Street sentiment remains broadly bullish. Veteran Wall Street strategist Ed Yardeni is optimistic that the S&P 500 could surpass 8,000 points by year-end. "Corporate earnings and the AI narrative are outweighing the impact of geopolitics and oil prices," said Dubravko Lakos-Bujas of JPMorgan in an interview. "But if the situation remains unresolved for another four to five weeks, the market could become complacent." At the close, the S&P 500 was down 0.2% at 7,400.96 points. The Dow Jones Industrial Average rose 0.1% to 49,760.56 points. The Nasdaq Composite fell 0.7% to 26,088.2 points. The Nasdaq 100 dropped 0.9% to 29,064.8 points. The Russell 2000 declined 1% to 2,842.831 points.