Wall Street gave up more of its recent gains Tuesday after a sell-off in big technology stocks spread from Asia back to the U.S. over worries about potentially higher interest rates by the end of the year.
The S&P fell 1.4%. The benchmark index is coming off 11 weekly gains out of the last 12, led largely by technology stocks. The Dow Jones Industrial Average, which is less influenced by tech stocks, gave up an early gain and closed just 0.1% lower. The Nasdaq composite fell 2.2%.
Markets throughout Asia fell. South Korea’s Kospi index, a big winner in the AI boom, sank 10%. Stocks in Europe also fell.
The selling largely targeted companies that have seen their values surge amid the frenzy over artificial intelligence technology. Their pricey stock values give them more influence over the broader market’s direction. On Tuesday, more stocks gained ground within the S&P 500 than fell, but tech companies overpowered gains elsewhere.
Micron Technology slumped 13.2% and Nvidia fell 4.1%. Samsung Electronics slumped 12.3% in South Korea.
SpaceX wavered in early trading then closed 1% higher. The space exploration and artificial intelligence company had a soaring market debut less than two weeks ago. The company plans to raise money through a bond offering, partly to fund AI development.
The growing likelihood of interest rate hikes later this year has helped deflate the massive run-up in AI-related stocks in recent days as traders worry that the higher rates could hamper economic growth.
Those Big Tech gains have been significant, sending major indexes on record-setting runs throughout 2026. Within the S&P 500, the tech sector alone is up 25.5% just over the last three months and 16.6% for the year. In Asia, South Korea’s Kospi has nearly doubled so far in 2026, even after Tuesday’s plunge.
Analysts have been warning that high-flying technology stocks could be due for a downturn.
“Viewed through this lens, a period of consolidation is reasonable, in our view, after such a sharp move higher,” wrote Brock Weimer, investment strategy analyst at Edward Jones, in a research note.
Many technology companies have been spending heavily on AI technology. The potential for higher interest rates can stifle future spending and hurt prices for investments. The Federal Reserve has signaled that it could raise interest rates at least once before the end of the year. Wall Street sees an 85% chance that the central bank will raise its benchmark interest rate this year, according to date from CME Group. That’s compared to 60% a week earlier.
The yield on the 10-year Treasury slipped to 4.50% from 4.51% late Monday. The yield on the 2-year Treasury fell to 4.20% from 4.24% late Monday. Bond yields remain high, though, amid worries about inflation.
Inflation has been heating up throughout the year. The impact from tariffs helped halt and reverse what had been an easing of inflation growth. The U.S. war with Iran quickly pushed energy prices higher, including gas prices. Higher energy costs have also made shipping more expensive for a wide range of goods, and that has been weighing on businesses and households. A report due Thursday with an inflation measure that is preferred by the Fed is expected to show that inflation rose to 4.1%, in May.
Oil prices have eased amid negotiations between the U.S. and Iran to end their war. The price for a barrel of U.S. crude for August delivery fell 0.9% to settle at $73.21. The September delivery price for a barrel of Brent crude, the international standard, fell 0.9% to settle at $76.80. Prices are still above levels of roughly $70 per barrel before the war began.
All told, the S&P 500 fell 107.33 points to 7,365.46, while the Nasdaq dropped 579.56 points to 25,587.04. The Dow lost 45.87 points to close at 51,666.84.
AP Senior Producer Mayuko Ono in Tokyo contributed to this report.