Stocks initially rose today, with the Dow Jones Industrial Average reaching a 1-week high. However, these gains were quickly eroded as chipmakers and AI-infrastructure stocks began to fall, leading to a broader market retreat. The iShares Semiconductor ETF (SOXX) was down over -3% to a 1-week low, with major losers including Sandisk (SNDK) down over -11%, Advanced Micro Devices (AMD) and Western Digital (WDC) both down over -6%. Other significant declines were seen in Lam Research (LRCX), ASML Holding NV (ASML), Micron Technology (MU), Applied Materials (AMAT), and Seagate Technology Holdings Plc (STX), all down over -5%, while KLA Corp (KLAC) fell over -4%.
The weakness in the semiconductor sector caused the Nasdaq 100 to drop to a 2.5-month low as investors shifted funds from AI-related stocks to underperforming sectors like software. Conversely, software companies saw a rally, with Workday (WDAY) leading gains in the S&P 500 and Nasdaq 100, up over +8%. Atlassian (TEAM) climbed over +7%, Autodesk (ADSK) and Oracle (ORCL) were up over +5%, and Salesforce (CRM) led Dow Jones Industrials gainers with over +4%. Adobe (ADBE) also rose over +4%, and ServiceNow (NOW), Palantir Technologies (PLTR), and Intuit (INTU) were all up over +3%. Microsoft (MSFT) gained over +2% and Datadog (DDOG) was up over +1%.
The overall market experienced mixed trading by the end of the day, with the S&P 500 Index ($SPX) up +0.11%, the Dow Jones Industrial Average ($DOWI) up +0.54%, and the Nasdaq 100 Index ($IUXX) down -0.46%. Geopolitical risks eased as Iran and the US held off attacks for a third day, contributing to a sharp decline in crude oil prices, which in turn supported global stock and bond markets. Crude oil prices slid by -6%, knocking the 10-year T-note yield down -3 basis points to 4.65%. The markets are currently pricing in a 38% chance of a +25 basis point rate hike at the next FOMC meeting.
Several factors influenced market sentiment, including the anticipation of strong Q2 earnings, with major technology companies like Amazon.com, Meta Platforms, and Microsoft expected to report. Forecasts suggest Q2 earnings could increase by +23%, driven largely by AI spending, which is projected to account for nearly 60% of the S&P 500's earnings-per-share growth. So far, 86% of the 135 S&P 500 companies that have reported Q2 earnings have beaten estimates. The easing of US-Iran tensions also led to a fall in bond yields and the dollar, with the 10-year Treasury yield decreasing about 5 basis points to 4.629%. Markets are largely expecting the Fed to keep the fed funds rate on hold at 3.50%-3.75%.
