U.S. technology stocks came under pressure on Tuesday as a sharp rise in oil prices stoked concerns about prolonged inflationary pressures and higher interest rates. The Nasdaq Composite closed down 1.03% at 26,099.77, after briefly recovering in the final hour of trading. The index had been down as much as 1.33% from Monday's close before paring losses.
The sell-off was driven by a 4.6% jump in Brent crude oil, which settled at $94.65 per barrel, following new U.S. military strikes targeting Iran. The escalation raised fears of supply disruptions in the Strait of Hormuz, a critical chokepoint for about 20% of global oil shipments. The rise in energy prices added to inflationary pressures, pushing the yield on the 10-year Treasury note to 4.798%, its highest level since January 2025, before easing to 4.77%.
Higher bond yields typically hurt growth-oriented technology stocks, as they reduce the present value of future earnings. The Technology Select Sector SPDR Fund (XLK) declined 1.51%, while the Energy Select Sector SPDR Fund (XLE) gained 1.30%. Among major tech names, Microsoft (MSFT) fell 1.24%, Advanced Micro Devices (AMD) dropped 2.36%, while Apple (AAPL) bucked the trend with a 2.61% gain.
The broader market also finished lower. The S&P 500 slipped 0.71% to 7,631.53, and the Dow Jones Industrial Average declined 0.79% to 52,766.93. Market breadth was negative, with decliners outpacing advancers by a wide margin on both the NYSE and Nasdaq. At 14:36 EDT, the NYSE had 2.7 decliners for every advancer, while the Nasdaq saw 3,403 decliners versus 1,280 advancers.
Economic data released Tuesday offered little relief. The ISM manufacturing index slipped to 54.6 in August, with new orders dropping three points to 53.7, while the prices component held steady at 71.1. U.S. job openings in July remained near 7.3 million, according to the Labor Department, failing to ease concerns about wage-driven inflation.
Jake Dollarhide, chief executive of Longbow Asset Management, told Reuters that "the global bond selloff is putting worldwide central banks on notice." Investors are now looking ahead to the August jobs report, due Friday at 08:30 EDT, which could influence the Federal Reserve's decision at its September meeting. Fed funds futures currently imply about a 66% probability of a rate increase, according to CME FedWatch.
Analysts noted that oil prices could swing quickly depending on diplomatic developments in the Middle East. A de-escalation could relieve pressure on yields, but any further escalation would likely keep risk assets under pressure. The market's late-day bounce, though modest, suggested some dip-buying interest, but the overall tone remained cautious.
Utilities and healthcare were among the few sectors to post gains, rising 0.81% and 0.66%, respectively, as investors sought defensive areas. Consumer discretionary and industrials were among the worst performers, falling 1.73% and 1.37%.
With the Fed's policy meeting approaching, the coming days are likely to be driven by macroeconomic data and geopolitical headlines. The combination of high oil prices, firming yields, and stretched valuations in the tech sector could keep volatility elevated.
