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The S&P 500 fell on Tuesday, bogged down by key technology stocks, as hopes among investors that the the Strait of Hormuz would reopen faltered, exacerbating lingering doubts that the U.S. and Iran can reach a broader resolution to the conflict.
The broad market index lost 0.32%, dropping for a second day and closing at 7,728.20. The Nasdaq Composite fell 0.60% to 26,445.45. The Dow Jones Industrial Average shed 184.13 points, or 0.34%, to end at 53,791.85.
Communication services was the leading S&P 500 laggard, falling more than 2% as Alphabet and AppLovin shares dropped 3.8% and nearly 6%, respectively. Alphabet shares have been under pressure recently, notching their fourth losing session in five, since Google announced last week that it’s reshuffling its artificial intelligence divisions.
Information technology was another sector in the red. Nvidia shares gave up their morning gain to close just below the flatline, even after the chipmaker on Monday said it’s partnering with six large asset managers to mobilize more than $500 billion for artificial intelligence infrastructure. Apple shares were also weak, dropping more than 1%.
The moves come as oil prices rose amid uncertainty over the Middle East conflict, with the secretary of Iran’s Supreme National Security Council reiterating that the strait would not reopen until its conditions have been met, per Reuters. U.S. West Texas Intermediate futures closed up 1.3% at $83.20 a barrel. International benchmark Brent crude gained about 1.4% to $88.91 a barrel.
Iranian Foreign Minister Abbas Araghchi had said earlier this week there was “no possibility of restarting negotiations” as long as the U.S. continues violating the June memorandum of understanding and does not compensate Iran for those violations, according to the semi-official Tasnim News Agency.
However, investors took comments from Pakistani Defense Minister Khawaja Asif as a positive signal Tuesday. In an interview with Bloomberg News, the official said that “things are shaping up again in favor of a peace arrangement or a deal.”
Investors will next turn to a key batch of inflation data, with the July consumer price report due Wednesday and the producer price index out Thursday. The readings could prove particularly important after a weak jobs report complicated the Fed’s outlook.
The inflation reports could put the Fed in a difficult position. Higher oil prices are renewing concerns about price pressures just as the sharp slowdown in hiring raises questions about the strength of consumer spending and the broader economy.
“I expect the CPI report to continue its downward trend which will further support the case for the Federal Reserve to hold rates steady rather than hiking them, even with last Friday’s weak jobs report,” said Dennis Follmer, chief investment officer at Montis Financial.
“Services inflation could continue to be a sticky problem, but that sector is not very sensitive to interest rates, so it shouldn’t really damage the case for holding steady,” he added.
