Stocks generally mirrored cautious movements across most asset classes as traders questioned whether robust earnings justified further advances in the artificial intelligence sector. Uncertainty also surrounded the Middle East. S&P 500 futures showed little change, while Nasdaq 100 contracts declined by 0.2%. Even a strong earnings beat and an increased sales outlook from Taiwan Semiconductor Manufacturing Co. (TSMC) failed to generate fresh gains for the chip sector, which has driven most of this year's stock market increases. Europe's Stoxx 600 was down by 0.4%. Chipmakers' leading role in this year's equity advances is increasingly under pressure as traders grapple with high stock valuations and concerns that AI hyperscalers might be building more capacity than necessary.
Brent crude held above $84 a barrel, influenced by ongoing US military actions in the Middle East, including a fifth consecutive day of strikes against Iran and an attack on a sanctioned oil tanker. Meanwhile, softer US inflation data eased pressure on interest rates, benefiting Treasuries, although the yield on 10-year Treasuries did tick up two basis points to 4.57%. The dollar remained largely unchanged, and gold headed for its first day of losses in three. The rising oil prices are a concern because energy costs feed into transportation and production, potentially slowing the disinflation trend and complicating central bank plans if sustained.
The cautious sentiment was particularly evident in Asia's semiconductor-heavy markets. South Korea's KOSPI index dropped 6.3%, with Samsung falling 8% and SK Hynix sliding 11%. This was exacerbated by concerns ahead of TSMC's earnings report, which was expected to show a 59% jump in April–June profit, setting a high bar for market expectations. The setup created a scenario where only exceptionally strong guidance, beyond just meeting expectations, would prevent selling. This highlights the market's sensitivity to even minor disappointments in the heavily-invested AI sector.
