After months of gains that lifted the major indexes from their March lows, momentum has been wobbling with uneven trading in heavyweight semiconductor stocks and weakness in software stocks.
The Philadelphia SE Semiconductor index ended higher, after bouncing off early losses. The index was angling for its third straight day of gains after three days of losses that had confirmed it was in a bear market last week.
Investors were preparing for second-quarter results from Alphabet and Tesla, the first of the so-called “Magnificent Seven” megacap companies to report after the bell for fresh evidence that these companies’ multibillion-dollar investments in AI are paying off.
“Investors have become a lot more discerning and specific as to where they’re choosing to invest in the AI trade,” said Kevin Gordon, head of macro research and strategy at Charles Schwab. Gordon noted that software stocks fell while chip stocks rose during the session.
Trading was choppy in Alphabet, which will be under scrutiny after a delay in the launch of a model central to its AI ambitions. Texas Instruments, also due to report after the close, ticked higher during the session.According to preliminary data, the S&P 500 lost 10.72 points, or 0.14%, to end at 7,498.48 points, while the Nasdaq Composite lost 145.48 points, or 0.56%, to 25,691.72. The Dow Jones Industrial Average rose 1.52 points to 52,226.16.The crowded earnings calendar leaves markets vulnerable to sharper swings this week, while geopolitical tensions added another layer of caution.
Crude oil futures recorded their highest settlement since June 11, up around 3% on the day as Yemen’s Iran-backed Houthi militia threatened shipping in the Red Sea, one of the world’s most important energy chokepoints along with the Strait of Hormuz.
U.S. President Donald Trump vowed on Wednesday to destroy an Iranian bridge or power plant every time Iran shoots at a ship in the strait.
“Excluding the megacap AI trade, there’s an element of what’s going on with oil that’s driving the market,” said Schwab’s Gordon, noting that high oil prices are fanning inflation worries. “People are being defensive with utilities, but with energy and materials being higher, that’s the inflation component.”
The Federal Reserve is expected to keep interest rates steady for the rest of 2026, according to the median forecast in a Reuters poll of economists. Still, respondents said the risk of a rate hike remained elevated.
Traders are pricing in a roughly 66% chance the Fed leaves rates unchanged at next week’s meeting, CME Group’s FedWatch tool showed.
Shares in Super Micro Computer rallied sharply after the server maker said it had secured more than $60 billion in new orders in the fourth quarter. Peers Dell Technologies and Hewlett Packard Enterprise also climbed after Super Micro reported upbeat preliminary results.
Among other movers, AT&T advanced after the telecom firm added more wireless subscribers than expected in the second quarter. Philip Morris International shares rose after stronger cigarette demand helped the company beat quarterly results estimates.
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