Technology stocks continued their downward trend Wednesday, weighing on Wall Street's key indexes as concerns over soaring valuations and market volatility persisted. The S&P 500 slipped around half a percent, marking its first consecutive daily decline in weeks. The Dow Jones Industrial Average dropped over 300 points, while the Nasdaq composite, heavily influenced by tech stocks, fell nearly one percent.
Shares tied to the artificial intelligence boom experienced notable losses after a recent surge. Investors appear wary that prices have accelerated too rapidly, prompting sell-offs. Super Micro Computer’s stock plunged after the company announced plans to raise billions through new share sales, which often dilutes existing shareholders. Micron Technology also retraced part of earlier gains, with its year-to-date growth narrowing despite having risen dramatically in recent months.
Earlier in the day, futures had signaled sharper declines in tech stocks, but an inflation report released before the opening bell helped stabilize the market. The report confirmed inflation had reached its highest point in three years, aligning with economists’ forecasts. Yet an important gauge reflecting underlying inflation eased more than anticipated in May, providing some relief to investors.
This inflation update prompted a modest retreat in Treasury yields, which have a strong influence on stock prices. The 10-year Treasury yield ticked down slightly, as did the two-year yield that closely mirrors expectations for Federal Reserve interest rate moves. These movements eased some of the strain felt by equities, particularly in sectors vulnerable to higher borrowing costs and valuations, like technology.
Market participants have been anticipating further interest rate hikes by the Fed this year due to persistent inflation and a robust labor market. The new data caused only a slight reduction in these bets. Meanwhile, uncertainty around crude oil prices added to market volatility. Fluctuations have been driven by hopes and setbacks over a possible agreement between the United States and Iran, which could affect oil shipments through the Strait of Hormuz.