U.S. equities retreated from record highs on Tuesday, with the Nasdaq Composite leading the decline as investors grew cautious ahead of a wave of Big Tech earnings. The Dow Jones Industrial Average slipped 25.86 points, or 0.05%, to close at 49,141.93. The S&P 500 lost 35.11 points, or 0.49%, ending at 7,138.80, while the Nasdaq Composite tumbled 223.30 points, or 0.90%, to settle at 24,663.80.
AI and Chip Stocks Under Pressure
The selloff was concentrated in artificial intelligence and semiconductor stocks, as fresh skepticism emerged following a report on OpenAI's user and revenue ambitions. Oracle dropped 4.1%, Nvidia and AMD each lost over 1.6%, and Broadcom fell 4.4%. CoreWeave, a company tied to AI infrastructure and backed by Nvidia, slid 5.8%. The weakness in AI names came ahead of earnings from major tech players, including Alphabet, Amazon, Meta Platforms, and Microsoft, which are due later this week.
Horizon Investment Services CEO Chuck Carlson noted that OpenAI's numbers "gave investors more food for thought" about the sustainability of AI-driven demand. The question remains whether cloud and chip demand can continue to support the heavy capital expenditure poured into data centers and long-lived technology.
After-Hours Earnings Moves
In after-hours trading, the focus shifted to earnings-driven moves. Visa shares climbed after the payment giant reported earnings that surpassed analyst expectations. Payment volume rose 9% in the second quarter, with CEO Ryan McInerney stating that "consumer spending remained resilient." American Express posted better-than-expected profits last week, and Mastercard is set to announce results later this week.
Starbucks jumped roughly 5% after hiking its yearly outlook and posting stronger-than-expected sales and earnings for the quarter. Global same-store sales increased 6.2%, beating the 3.7% analysts had projected. CEO Brian Niccol told investors, "The shine is back."
Chip and storage names diverged from the earlier AI-driven slump. Seagate rallied as its fourth-quarter revenue and profit outlook beat Wall Street estimates, lifted by AI-fueled demand for storage hardware. Western Digital, SanDisk, and Micron also moved higher. NXP Semiconductors surged after forecasting second-quarter revenue and adjusted earnings ahead of analysts' projections, citing improving demand for automotive and industrial chips. Texas Instruments also put out an upbeat outlook last week, supported by strength in data center and industrial sectors.
Robinhood dropped over 8% in after-hours trading as first-quarter earnings came up short, with transaction revenue slipping due to softer take rates in both options and crypto. David Bartosiak, stock strategist at Zacks Investment Research, called it a "prove-it story."
Macro Concerns: Oil and the Fed
Oil prices climbed on Tuesday, with WTI crude clearing $100 a barrel and Brent topping $110, according to Reuters' Trading Day. These levels threaten to push fuel costs higher and complicate the Federal Reserve's rate calculus. The Fed kicked off its two-day meeting, with traders eyeing whether pricier oil could stoke inflation as rate decisions loom. Energy was the top-performing S&P 500 sector, while tech stocks took the hardest hit.
U.S. consumer confidence ticked higher in April, hitting the strongest level in four months, according to the Conference Board. However, gasoline prices remained a sticking point in the survey. Oren Klachkin, economist at Nationwide Financial, flagged that a resilient job market won't do much to shield consumers from elevated energy bills.
Outlook
There is a risk that Wednesday won't deliver clarity for either bulls or bears. Weak AI returns from Alphabet, Amazon, Meta Platforms, or Microsoft could spread the selloff in Nvidia, Oracle, and CoreWeave. Persistent high oil prices could box in the Fed on rates. "The question is whether energy inflation could have a very much longer-term impact," said Oliver Pursche, senior vice president at Wealthspire Advisors.
