US stocks tumbled, pushing the S&P 500 Index towards its worst day in a month, as doubts emerged regarding the profitability of debt-fueled artificial-intelligence investments, significantly impacting big tech stocks. The S&P 500 was down 1.21%, falling further below its 50-day moving average, despite recovering from an earlier 1.6% drop. The Nasdaq 100 Index dropped 1.85%, weighed down by substantial losses in Alphabet Inc. and Tesla Inc. A basket of the "Magnificent Seven" companies fell 4.54%, extending a weekly drop of 5.6%, which was their worst performance since early June.
Equities also sank under the pressure of escalating oil prices, with Brent crude surpassing $100 a barrel. This rise in oil prices threatens to reaccelerate inflation and increased speculation that the Federal Reserve might raise interest rates as soon as next week. Energy shares, however, were among the best-performing groups in the S&P 500, advancing 1.03%. The increase in oil prices was attributed to an intensifying conflict with Iran, particularly after Iran-backed Houthis claimed an attack on two Saudi Arabian oil tankers in the Red Sea.
Individual stock performance highlights included Alphabet sliding 6.56% after the Google parent company provided a higher-than-expected outlook for capital expenditures, fueling investor fears about the sustainability of AI spending. Tesla Inc. also slumped, experiencing a 14% drop as its profit declined despite strong electric-vehicle deliveries. Rising oil prices also contributed to an increase in bond yields, with money markets indicating a roughly 35% chance of a Fed rate hike at the upcoming July meeting, up from approximately 10% a week prior.
