US stock markets ended lower for the third consecutive session on Tuesday as investors remained concerned about rising Treasury yields, persistent inflation pressures and volatile oil prices. Technology and semiconductor stocks came under pressure once again, while investors also turned cautious ahead of Nvidia’s closely watched earnings report due later this week.
The benchmark S&P 500 fell 0.7%, while the Nasdaq 100 slipped 0.6%. Semiconductor stocks also gave up most of their intraday gains, with the Philadelphia Semiconductor Index (SOX) ending nearly flat after rising as much as 1.9% earlier in the session. Nvidia shares declined ahead of its quarterly earnings announcement scheduled for Wednesday.
The broader market mood remained weak as Treasury yields continued climbing sharply. The 30-year US Treasury yield moved closer to 5.20%, while the 10-year yield crossed 4.65%, raising concerns that elevated borrowing costs could hurt corporate earnings and stock valuations.
According to economists and market strategists, higher yields are making investors increasingly nervous about the outlook for equities.
“The rise in yields increases the cost of capital and could weigh on equity valuations at a time when investors are preparing for earnings from major consumer-focused companies,” RSM economist Joseph Brusuelas said.
The S&P 500 has now lost nearly 2% over the last three trading sessions, with declining stocks significantly outnumbering advancing ones on Tuesday.
Semiconductor, Software Stocks Remain Under Pressure
Semiconductor shares remained volatile throughout the session. The Roundhill Memory ETF, a closely watched indicator for memory-chip stocks, managed to gain 0.9%, but broader semiconductor momentum weakened toward the close.
Software stocks initially traded higher before reversing gains. The iShares Expanded Tech-Software Sector ETF (IGV) eventually ended down 1%. Despite the weakness, some analysts believe software companies may still offer long-term value after months of underperformance.
Fundstrat Head of Research Thomas Lee said the sector’s risk-reward profile remains attractive because software stocks have significantly lagged semiconductor shares since late last year.
The broader “Magnificent Seven” technology stocks also traded lower. Alphabet’s Google remained in focus after the company said its AI Mode had crossed one billion monthly active users globally. Google also announced a new artificial intelligence cloud partnership with Blackstone.
Oil Prices, Iran Tensions Add To Inflation Concerns
Investors also closely tracked developments in the Middle East as geopolitical tensions continued influencing oil prices.
West Texas Intermediate crude oil slipped around 0.8% to trade near $108 per barrel. Oil prices had surged more than 50% since the beginning of hostilities involving Iran earlier this year, intensifying global inflation worries.
US President Donald Trump recently threatened to resume military strikes on Iran if negotiations failed, although Gulf allies including Saudi Arabia and Qatar have reportedly urged Washington to allow more time for diplomacy.
Analysts warned that sustained high oil prices could worsen inflationary pressures and complicate the Federal Reserve’s policy outlook.
Ed Yardeni, President of Yardeni Research, noted that while stagflation does not automatically destroy stock market performance, companies would need to continue expanding profit margins to sustain earnings growth.
Market Experts Turn More Cautious
Some strategists are beginning to adopt a more defensive stance on equities heading into the second half of the year.
Wells Fargo Securities analyst Ohsung Kwon said risks are increasing due to inflation concerns, election uncertainty, fiscal pressure and rising stock supply from IPOs.
Historically, US midterm election years have often seen sharp second-half market corrections, adding to investor caution.
Meanwhile, BTIG Chief Market Technician Jonathan Krinsky suggested investors watch consumer-linked stocks closely, noting that some retail and restaurant shares showed resilience despite rising oil prices and interest rates.
Corporate Movers In Focus
Home Depot shares recovered from early losses after the company reported mixed quarterly earnings. The home improvement retailer has faced pressure from high mortgage rates and slowing housing demand.
Citigroup shares dropped 2% after CFRA downgraded the stock, citing concerns that geopolitical tensions and inflation could hurt consumer confidence and lending activity.
Retail earnings will remain in focus this week, with companies including Target, Lowe’s and TJX Companies scheduled to report results.
Space-related stocks also attracted attention after reports suggested SpaceX could publicly file for its long-awaited IPO as early as Wednesday. Tesla shares, however, fell 1.4% during the session.