US stocks fell sharply on Tuesday, with the Nasdaq Composite falling 3% and the S&P 500 losing 1.7%, as a one-day rally in chip stocks reversed course and optimism about a potential US-Iran deal gave way to new uncertainty, according to CNBC.
The Dow Jones Industrial Average lost approximately 354 points, or 0.7%. Markets had opened higher as oil prices retreated, and President Donald Trump told reporters Monday that the two sides were “very close to having a good, strong, powerful deal” that could reopen the Strait of Hormuz, according to The Wall Street Journal. Trump said later Tuesday that the United States “must respond” to Iran, contributing to the reversal of actions.
West Texas Intermediate crude oil futures fell more than 5% to trade below $90 a barrel. US Energy Secretary Chris Wright said ship traffic through the Strait of Hormuz is “increasing very significantly.”
Chip stocks led the decline. After posting a 6% rally on Monday, the iShares Semiconductor ETF reversed sharply, falling nearly 7%. The PHLX semiconductor index fell 7%. Marvell Technology shares fell 14%, Micron Technology shares fell about 8%, and Broadcom shares lost 5%. Shares of Apple, Intel and AMD each fell 3% or more.
Both stocks had suffered severe losses earlier in the week – Micron’s two-day drop last week amounted to around 20%, and Friday represented a 13% drop – while Broadcom endured a comparably tough stretch over the same period.
On Monday night, OpenAI filed a confidential IPO filing, adding another notable name to a busy week for the markets. The expected stock market arrival on Friday of SpaceX, valued at $1.75 trillion and widely seen as a hybrid space and artificial intelligence company, would set a record as the largest public offering in history. Analysts have pointed to the impending IPO as a possible reason why investors are trimming positions in established tech names to make room for the new entrant, according to the Journal.
Jay Hatfield, CEO of Infrastructure Capital Advisors, said he believes SpaceX’s listing may have contributed to Friday’s initial sell-off. “I think everyone is a little nervous,” Hatfield said. “I think we’re going to be shaky until that’s behind us.”
Tehran’s Foreign Ministry said Iran had abandoned its military campaign against Israel on Monday, although it reserved the right to restart attacks if Israeli operations in Lebanon continued. Netanyahu rejected any suggestion that the fighting had ended and said late Monday that the standoff with Iran and Hezbollah remained unresolved.