Nasdaq slides 1.5% as oil tops $93 and bond yields climb

The Nasdaq Composite fell 1.5% midday as oil above $93 and rising yields pressured tech stocks, prompting traders to reassess rate-cut expectations.

"The combination of higher energy costs and rising bond yields creates a difficult environment for high-multiple tech names," said Joe Mazzola, head trading and derivatives strategist at Charles Schwab Corp. "Traders are reassessing the timeline for rate cuts as both inflation and growth data come in stronger than expected."

The selloff was concentrated in software and semiconductor names. The iShares Expanded Tech-Software Sector ETF fell 3%, erasing its year-to-date gains. Microsoft Corp. dropped 3%, Intuit Inc. slid 9%, and Palantir Technologies Inc. lost more than 4%. Chipotle Mexican Grill Inc. fell 2.4% after a Morgan Stanley downgrade to equal weight from overweight. On the upside, CarMax Inc. gained 7.4% ahead of its earnings report, while Hewlett Packard Enterprise Co. surged more than 23% after reporting record quarterly revenue driven by AI infrastructure demand.

The move comes as traders recalibrate expectations for Federal Reserve policy. Cleveland Fed President Beth Hammack warned Tuesday that "if recent trends continue, it may soon be appropriate to act" on rate hikes, citing concern that elevated inflation could become entrenched. The next catalyst for markets is Friday's May jobs report, which will provide the latest read on labor market tightness.

The pressure on equities unfolded against a backdrop of stronger-than-expected economic data. The ISM services purchasing managers' index came in at 54.5 for May, above the 53.9 consensus and the prior month's 53.6 reading, indicating continued expansion in the service sector. The Job Openings and Labor Turnover Survey showed 7.62 million job openings in April, far exceeding the 6.89 million estimate — the highest tally since May 2024.

Oil and Yields Drive Cross-Asset Pressure

Brent crude futures rose 1% to trade near $95 a barrel, while West Texas Intermediate climbed above $93, as uncertainty over US-Iran negotiations kept supply risks elevated. President Trump said talks with Iran were continuing "at a rapid pace," but a report that Tehran was halting discussions earlier in the week sent oil prices surging. The US 10-year Treasury yield rose alongside crude, compressing the premium investors demand for holding long-duration equities and amplifying the pressure on growth stocks.

Despite the intraday selloff, major indexes recovered by the close. The Dow Jones Industrial Average, which had been down nearly 400 points at its session low, closed up 0.5% at a fresh record. The S&P 500 eked out a 0.1% gain to a new all-time high, while the Nasdaq Composite edged slightly higher, erasing most of its intraday decline. The recovery suggested dip buyers viewed the tech selloff as an opportunity to add exposure ahead of key earnings from Palo Alto Networks Inc., due after the bell.

Bitcoin also came under pressure, falling more than 5% to below $68,000, its lowest level since April 8, as spot bitcoin exchange-traded funds saw outflows for an 11th consecutive day.

This article is for informational purposes only and does not constitute investment advice.