Escalating US-Iran conflict stokes inflation fears, pushes up Treasury yields; semiconductors hold firm amid big-tech selloff as Philadelphia Semiconductor Index rises 1.39%

A trader works on the floor of the New York Stock Exchange on Wednesday. [Yonhap]
A trader works on the floor of the New York Stock Exchange on Wednesday. [Yonhap]

US stocks closed lower across the board Wednesday as escalating geopolitical tensions in the Middle East and a sharp rise in crude oil prices rattled markets. A renewed flare-up in military exchanges between the United States and Iran deepened inflation concerns, while rising Treasury yields dampened investor sentiment.

The Dow Jones Industrial Average fell 620.72 points, or 1.21 percent, to close at 50,687.07 on the New York Stock Exchange. The S&P 500 dropped 56.10 points, or 0.74 percent, to 7,553.68, and the Nasdaq slid 239.93 points, or 0.89 percent, to 26,853.98. The decline ended the S&P 500's nine-session winning streak.

Markets were focused on deteriorating conditions in the Middle East. Overnight exchanges of strikes between the US and Iran fueled doubts about whether a truce could hold. Investors grew wary that a prolonged breakdown in negotiations between the two countries could disrupt shipping through the Strait of Hormuz and destabilize global oil supply.

Oil prices rose sharply. West Texas Intermediate futures settled at $96.02 a barrel, up 2.41 percent from the previous session, while Brent crude futures gained 1.89 percent to $97.81 a barrel.

The surge in oil prices added upward pressure on Treasury yields. The yield on the 10-year US Treasury note approached 4.5 percent, while the 30-year yield climbed toward 5 percent.

Economic data released Wednesday also pushed yields higher. Private payrolls grew by 122,000 in May according to ADP, the largest monthly gain since January last year. The services sector continued to expand even as input costs rose at their fastest pace in nearly four years.

Concerns about Federal Reserve tightening resurfaced in markets. According to CME FedWatch, financial markets are now pricing in a 41.1 percent probability of a rate hike at the December Federal Open Market Committee meeting — up sharply from just 9.1 percent a month ago.

"There are concerns that consumption and spending may not slow easily at a time when the economy appears to be reaccelerating," said Sean Snyder, an economic strategist at Potomac Fund Management.

Among individual stocks, large-cap technology names led the decline. Nvidia tumbled 3.62 percent, Microsoft fell 3.17 percent, Amazon dropped 2.53 percent and Apple lost 1.57 percent. Oracle slid 5.83 percent. Meta bucked the trend, surging 4.24 percent on positive analyst commentary.

Semiconductor stocks held up relatively well. Micron gained 1.45 percent, Intel rose 4.43 percent and ASML added 1.23 percent. The Philadelphia Semiconductor Index advanced 1.39 percent, standing out as a bright spot in an otherwise weak session.

The resilience of chip stocks even as the broader market fell reinforced the view that enthusiasm for AI investment remains intact.

"AI-related names are moving independently of macroeconomic and geopolitical risks," said Ross Mayfield, an investment strategy analyst at Baird. "Even on days when the broader market is weak, we're still seeing buying interest flow into those stocks."


hajun825@heraldcorp.com