US stocks turned lower by midday on Tuesday, Beijing time. Semiconductor stocks lost their upward momentum after a one-day rebound. Falling oil prices helped lift the materials and consumer discretionary sectors against the broader market trend. Investors continued to monitor the latest developments in the Middle East.
The Dow Jones Industrial Average fell 278.33 points, or 0.55%, to 50,507.68. The Nasdaq Composite dropped 577.52 points, or 2.23%, to 25,352.14. The S&P 500 index declined 95.41 points, or 1.29%, to 7,310.32.
The iShares Semiconductor ETF fell nearly 4% by midday Tuesday, following a 6% rebound on Monday. The ETF plunged 10% last Friday, marking its worst single-day performance in six years, as investors grew concerned that the AI-driven chip rally had become too rapid and excessive.
Micron Technology shares tumbled 5.9%, after surging 10% on Monday and plummeting 13% last Friday.
Broadcom shares fell 4.6%, following a similarly sharp two-day decline last week.
US stocks had opened higher, buoyed by falling energy prices on hopes for a durable ceasefire in the Middle East.
West Texas Intermediate crude futures dropped 4%, trading below $90 per barrel, after US Energy Secretary Chris Wright stated that vessel traffic through the Strait of Hormuz was "increasing very meaningfully."
This followed remarks from former US President Donald Trump, who indicated that the US and Iran could reach a deal "within two or three days" to "immediately" reopen the Strait of Hormuz.
Despite the S&P 500 energy sector falling nearly 2%, the drop in oil prices had an overall positive effect. The materials and consumer discretionary sectors led gains on the benchmark index, while the real estate sector also provided a lift following better-than-expected existing home sales data.
Iran's foreign ministry stated to media on Monday that Iran had ceased military strikes against Israel that day but warned that attacks would resume if Israeli forces continued operations in Lebanon. Hours later, Israeli Prime Minister Benjamin Netanyahu said the conflict with Iran and Hezbollah was "not over."
In Asian markets, Japan's Nikkei 225 rose over 2% to close at 65,416.63. South Korea's KOSPI rebounded sharply from Monday's plunge, surging 8.18% to finish at 8,096.93. Hong Kong's Hang Seng Index edged up 0.15%, while mainland China's CSI 300 gained 1.87% to close at 4,801.81. Australia's benchmark S&P/ASX 200 index dipped 0.24% to settle at 8,604.2. European stocks also advanced, with the Stoxx Europe 600 up 0.5%.
OpenAI privately filed for an initial public offering late Monday, further fueling enthusiasm for the AI sector. SpaceX, active in aerospace and artificial intelligence, is scheduled to go public on Friday in what is expected to be the largest IPO in history. Some view the listing as adding fuel to the AI-driven bull market, while other investors worry that the company's $1.75 trillion valuation could also mark a peak for the trend.
On the economic data front Tuesday, the US trade deficit has shrunk by roughly half over the past year since former President Donald Trump announced his "Emancipation Day" tariff policy.
The US Commerce Department reported Tuesday that the total goods and services trade deficit for April was $55.9 billion. This brings the year-to-date deficit down by $213.5 billion compared to the same period last year, a decrease of 49%. The deficit for the month was $7 billion lower than in March and also below the $56.1 billion forecast in a Dow Jones survey.