2026-08-18 · trading-venues

Stocks Finish Lower as Chipmakers and AI Stocks Fall

The S&P 500 Index ($SPX) (SPY) closed down by -0.69% on Tuesday, the Dow Jones Industrial Average ($DOWI) (DIA) closed down by -0.22%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down by -1.68%. E-mini S&P futures (ESU26) fell -0.69%, and September E-mini Nasdaq futures (NQU26) fell -1.67%.

Stock indices settled lower on Tuesday, with the S&P 500 and the Dow Jones Industrial Average falling to 2-week lows, and the Nasdaq 100 sliding to a 1.5-week low. The rout in chipmakers and AI-infrastructure stocks on Tuesday weighed on the broader market. Also, rising crude oil prices bolstered inflation concerns and boosted bond yields globally, undercutting stocks. Crude oil prices are rising and fueling inflation concerns as hostilities in the Middle East show no signs of easing. WTI crude oil climbed to a 3-week high on Tuesday, which pushed the 10-year Japan JGB bond yield up to a 30-year high of 2.967%, the 10-year German Bund yield up to a 15-year high of 3.272%, and the 10-year T-note yield up to a 1.5-year high of 4.75%. However, stocks recovered from their worst level on Tuesday after bond yields fell from their highs and moved lower. The 10-year T-note yield fell -2 bp to 4.70%.

Tuesday's US housing news was mixed for stocks. July housing starts fell -12.4% m/m to 1.239 million, weaker than expectations of 1.345 million. However, July building permits, a proxy for future construction, rose +5.0% m/m to a 5-month high of 1.443 million, stronger than expectations of 1.375 million.

Other US economic news on Tuesday was mixed for stocks. The July import price index ex-petroleum rose +0.3% m/m, stronger than expectations of +0.1% m/m. Also, July manufacturing production rose +0.2% m/m, right on expectations. In addition, July pending home sales fell -2.3% m/m, weaker than expectations of no change.

Sep WTI crude oil prices (CLU26) pushed up to a 3-week high on Tuesday after a vessel heading out of the Strait of Hormuz was struck by an unknown projectile. Also, President Trump said he's not interested in extending the expired agreement with Iran, dimming prospects for a swift reopening of the Strait of Hormuz. Mr. Trump also said that the US naval blockade on Iranian ports is putting pressure on the country, and he has no timeline for resolving the US-Iran conflict.

On Monday, US Energy Secretary Chris Wright said that the US is playing the long game with Iran, implying the US has no plans to de-escalate the conflict, potentially limiting crude supplied from the Middle East.

Treasury Secretary Bessent said last week that the administration will soon announce unprecedented economic measures against Iran that "have never been seen in the history of economic isolation of a country." The economic measures would add to the current US naval blockade of Iranian ports.

There have been no signs of progress toward a US-Iran agreement to fully open the Strait of Hormuz. An Iranian military spokesperson said last Thursday that no ship can safely pass the Strait of Hormuz without Iran's authorization and supervision and that President Trump's claims of control over the Strait are "nothing more than lies." The Iranian statement was in response to President Trump's comment last Tuesday that the US has "total control over the Hormuz Strait" and that "we own it."

The outlook for strong Q2 earnings is a bullish factor for stocks. The S&P 500 is tracking for earnings growth of almost 32% in Q2, well above projections of +23%, and nearly four times the average earnings growth rate outside of the Covid period since Q4 of 2013, according to Bloomberg Intelligence. AI spending is expected to account for most of earnings, with AI infrastructure stocks set to contribute nearly 60% of the S&P 500's earnings-per-share growth in Q2. So far, earnings results have been positive, with 85% of the 456 S&P 500 companies that have reported Q2 earnings beating estimates, according to Bloomberg data.

The markets are discounting a 35% chance of a +25 bp rate hike at the next FOMC meeting on September 15-16.

Overseas stock markets settled mixed on Tuesday. The Euro Stoxx 50 fell to a 2-week low and closed down -0.95%. China's Shanghai Composite climbed to a 5-week high and closed up +0.19%. Japan's Nikkei-225 Stock Average closed down sharply by -2.54%.

September 10-year T-notes (ZNU6) closed up +3.5 ticks on Tuesday. The 10-year T-note yield fell -1.8 bp to 4.704%. Sep T-notes recovered from a 1-week low on Tuesday and moved higher, and the 10-year T-note yield fell from a 1.5-year high of 4.746%. Short covering emerged in T-notes on Tuesday after stocks retreated, which boosted safe-haven demand for T-notes. Also, the unexpected decline in US July pending home sales supported T-notes.

T-notes initially moved lower on Tuesday after WTI crude oil prices rose to a 3-week high, pushing inflation expectations higher. The 10-year breakeven inflation rate rose to a 2-month high of 2.308% on Tuesday. Also, the larger-than-expected increase in the July import price index ex-petroleum was negative for T-notes.

European government bond yields moved higher on Tuesday. The 10-year German bund yield rose to a 15-year high of 3.272% and finished up +3.8 bp to 3.259%. The 10-year UK gilt yield climbed to a 3.5-week high of 5.101% and finished up +2.0 bp to 5.080%.

The German Aug ZEW expectations of economic growth survey rose +7.9 to a 6-month high of 34.2, stronger than expectations of 30.0.

ECB Chief Economist Philip Lane said the pace of consumer price increases in the Eurozone is likely to hold "well above" the ECB's 2% target this year due to the Iran war.

Markets are discounting a 95% chance of a +25 bp ECB rate hike at its next policy meeting on September 10.

Chipmakers and AI-infrastructure stocks sold off on Tuesday, weighing on the broader market. The iShares Semiconductor ETF (SOXX) fell nearly -5%. Sandisk (SNDK) and Seagate Technology Holdings Plc (STX) closed down more than -9%, and Marvell Technology (MRVL), Western Digital (WDC), and Micron Technology (MU) closed down more than -7%. Also, ARM Holdings Plc (ARM) and Intel (INTC) closed down more than -6%, and KLA Corp (KLAC) closed down more than -5%. In addition, Advanced Micro Devices (AMD), Lam Research (LRCX), and ASML Holding NV (ASML) closed down more than -4%, and Applied Materials (AMAT), Broadcom (AVGO), Analog Devices (ADI), and Texas Instruments (TXN) closed down more than -3%.

Software stocks rose on Tuesday, a supportive factor for the overall market. Intuit (INTU) closed up more than +4% to lead gainers in the Nasdaq 100, and Adobe Systems (ADBE) closed up more than +3%. Also, Autodesk (ADSK), Atlassian Corp (TEAM), and Salesforce (CRM) closed up more than +2%, and Thomson Reuters (TRI), ServiceNow (NOW), and International Business Machines (IBM) closed up more than +1%.

Klarna Group Plc (KLAR) closed down more than -22% after cutting its full-year revenue forecast to $4.08 billion to $4.16 billion, well below a previous forecast of $4.34 billion.

Fabrinet (FN) closed down more than -19% despite reporting better-than-expected Q4 EPS as Datacom sales disappointed.

Andersen Group (ANDG) closed down more than -6% after holders offered 4.28 million shares of the company's common stock.

Meta Platforms (META) closed down more than -4% as the company is facing a jury trial in federal court over claims it deliberately designed Facebook and Instagram to encourage compulsive use among young users.

Amylyx Pharmaceuticals (AMLX) closed up more than +64% after saying that its GLP-1 receptor met its primary endpoint in a late-stage trial as a treatment for patients who experience low blood sugar levels following bariatric surgery.

Targa Resources (TRGP) closed up more than +7% to lead gainers in the S&P 500 after announcing that it signed a 20-year, fee-based integrated midstream agreement with ExxonMobil.

Duolingo (DUOL) closed up more than +7% after D.A. Davidson upgraded the stock to buy from neutral with a price target of $160.

Bath & Body Works (BBWI) closed up more than +6% after Citigroup upgraded the stock to buy from neutral with a price target of $25.

Tapestry (TPR) closed up more than +2% after Daiwa Securities upgraded the stock to outperform from neutral with a price target of $140.

Analog Devices Inc (ADI), BILL Holdings Inc (BILL), Estee Lauder Cos Inc/The (EL), Lowe's Cos Inc (LOW), Nordson Corp (NDSN), Target Corp (TGT), TJX Cos Inc/The (TJX), Viking Holdings Ltd (VIK).

On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.