US stocks opened lower on July 1 as investors locked in gains from a record-breaking first half in semiconductor stocks while renewed geopolitical tensions with Iran added to the risk-off tone.
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Dow drops 253 points as chip stocks retreat, Iran tensions resurface
US stocks opened lower on July 1 as investors locked in gains from a record-breaking first half in semiconductor stocks while renewed geopolitical tensions with Iran added to the risk-off tone.
The Dow Jones Industrial Average fell 253 points as chip stocks retreated from a record-breaking first half and US-Iran tensions resurfaced.
"The rotation out of AI hyperscalers into AI enablers has shifted investors' euphoria into semis, driving spectacular rallies," Barclays analyst Anshul Gupta said in a note Tuesday, as the Philadelphia Semiconductor Index capped its best-ever quarterly gain.
The Philadelphia Semiconductor Index surged more than 80% in the second quarter and has gained over 90% year-to-date through June 30, putting it on track for its strongest performance since the dot-com era. The tech-heavy Nasdaq Composite jumped 21.4% in the quarter and 12.8% in the first half, while the S&P 500 added 14.9% and 9.5%, respectively. The Dow had posted its best first-half performance in five years, gaining 8.85% through June.
The selloff comes as traders reassess positioning ahead of Federal Reserve Chairman Kevin Warsh's speech Wednesday at the European Central Bank Forum on Central Banking in Sintra, Portugal. While Warsh is not expected to provide forward guidance, markets are watching for cues on inflation and interest rates, especially as half of Fed policymakers anticipate a rate increase this year. Renewed US-Iran tensions could also push crude oil prices higher, adding to inflationary pressures.
The decline in chip stocks follows a blockbuster rally that added about $2 trillion in combined market capitalization to Micron Technology Inc., Intel Corp. and Advanced Micro Devices in the second quarter, according to a CNBC report. Nvidia Corp. rose more than 2.6% on Tuesday, while AMD rallied over 7% and Intel gained 6% at the close of the quarter. The profit-taking in semiconductors, which drove much of the market's first-half gains, suggests investors may be rotating out of the sector that led the rally.
On the geopolitical front, reports that US envoy Steve Witkoff and Jared Kushner met Qatar's prime minister in Doha after President Donald Trump said Iran had requested talks failed to ease tensions. Tehran denied that any meeting with US officials is currently scheduled, while discussions on Iran's frozen assets and the Strait of Hormuz continue. Oil futures climbed in overnight trading as markets watched the developments closely. Brent crude futures for August traded near $72.92 per barrel, while WTI crude gained about 0.6% to $69.94.
The 10-year Treasury yield stood at 4.457%, while the US dollar index was near 101.10. West Texas Intermediate crude, which has declined more than 40% from its wartime peak of $119.48 on March 9, traded around $70 per barrel. Spot gold prices declined to about $3,978.70 an ounce.
Markets will also watch for the June non-farm payroll report and the ISM Manufacturing PMI due later this week. US stock and bond markets will be closed Friday for Independence Day.
This article is for informational purposes only and does not constitute investment advice.
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