Key facts
- US stocks fell on Thursday as crude oil prices surged.
- Rising oil prices were attributed to Middle East tensions and a cut in US output.
- Semiconductor stocks declined 3.0%, with investors concerned about interest rates impacting AI funding.
- The Nasdaq Composite was the biggest loser among the major US indexes.
- Benchmark US Treasury yields inched higher, nearing multi-year highs.
Wall Street indexes declined on Thursday, with the Nasdaq Composite leading the losses, as a surge in crude oil prices and a slump in semiconductor stocks weighed on investor sentiment. The rise in oil prices was attributed to increased tensions in the Middle East and a reduction in US output, fueling concerns about inflation and potential further interest rate hikes by the Federal Reserve.
Chipmakers, which have seen significant gains this year, were notable underperformers, dropping 3.0%. Investors are reportedly worried that rising interest rates could negatively impact the rapid buildout of artificial intelligence infrastructure, which has relied heavily on debt financing.
Market participants expressed nervousness due to high oil prices as the market approaches earnings season. This sentiment, coupled with profit-taking, contributed to the day's decline. Oil prices jumped due to supply concerns stemming from attacks on shipping in the Strait of Hormuz and a cut in US output caused by hurricane activity.
Benchmark US Treasury yields moved higher, nearing multi-year highs, with yields on 2-year notes reflecting increased expectations for Federal Reserve rate policy. Financial markets currently anticipate the Fed will hold rates steady this month, but there is a significant probability of a December hike. Fed Governor Christopher Waller indicated that additional rate hikes might be necessary, with flexible timing.
Among specific companies, Samsung Electronics' shares fell despite a strong quarterly profit forecast. Broadcom and Oracle also declined, with reports suggesting Broadcom is arranging significant financing for OpenAI, raising concerns about increased competition for capital. PepsiCo shares rose after announcing spending cuts and a lowered profit forecast. Starbucks dipped on news of potential acquisition talks with Chipotle Mexican Grill, whose shares surged. Palantir saw gains following a 'buy' upgrade from Goldman Sachs.