Monday’s chip recovery lasted exactly one day. Tuesday brought another selloff in semiconductors, fresh geopolitical trouble, and oil moving higher again. Not a great combination heading into Fed minutes Wednesday.
Semiconductor Stocks Lead Nasdaq Lower
Nasdaq dropped 1.2% Tuesday. S&P 500 lost 0.5%. Dow slipped 131 points or 0.3%. Broad based decline but chip stocks were clearly at the center of it again.
South Korea’s memory chip selling from Tuesday morning spilled directly into US trading. Samsung fell nearly 10% in Seoul despite projecting massive profit growth. That weakness carried over and hit US semiconductor names. Monday’s rebound in Intel and Micron gave way to fresh selling by midday.
Pattern is becoming familiar. Chips rally. Then sell off, rally briefly. Then sell off again. Each recovery is getting questioned faster than the one before it. Market is not convinced the recent chip gains were justified at those valuations even with strong underlying demand.
US-Iran Tensions Push Oil Prices Higher
Geopolitical situation that everyone thought was moving toward resolution took a sharp turn Tuesday. US launched strikes against Iran describing them as a response to attacks on commercial vessels in the Strait of Hormuz. Washington also revoked Iran’s oil export license on the same day.
Two moves at once. Military strikes and economic pressure simultaneously. The peace deal signing that was supposed to happen in Switzerland feels like a long time ago now.
Oil reacted fast. West Texas Intermediate crude climbed 2.1% to around $72 a barrel. Brent crude advanced 1.9% to roughly $75.50. Higher oil means higher inflation risk. Higher inflation risk means Fed has more reason to keep rates elevated or raise them further. That chain of events is bad for growth stocks and bad for the broader market narrative that rate hikes might be done.
Bond yields also moved higher as investors reassessed inflation risks. Rising yields make future corporate earnings worth less in today’s terms. That hits expensive tech and AI names hardest because so much of their valuation is based on earnings years from now.
Nasdaq Futures Stay Steady Before Fed Minutes
Despite everything that happened Tuesday the overnight futures reaction was measured. Dow futures edged lower by about 50 points. S&P 500 futures were roughly flat. Nasdaq futures actually managed a small 0.2% gain.
That calm might reflect traders waiting for the Fed minutes before making bigger moves. When a major catalyst is hours away positioning tends to stay light. Why make a big bet Tuesday night when Wednesday’s minutes might completely change the picture.
Asia stayed under pressure overnight. Japan Nikkei slipped 0.5%. Topix lost 0.3%. South Korea Kospi fell another 2.2%. Chip stocks continuing to unwind across the region with no clear sign of a floor forming yet.
Fed Minutes Could Drive the Next Market Move
June meeting minutes drop Wednesday. First FOMC meeting under Kevin Warsh. Markets already know rates stayed unchanged and dot plot turned more hawkish. What the minutes add is the detail behind those decisions.
How worried are officials about inflation specifically. How close did any votes come to a different outcome. What internal language did Warsh use that did not make it into the public statement. All of that gets parsed carefully by bond traders, equity investors, and currency markets simultaneously.
Fresh US-Iran military exchanges make Wednesday’s inflation discussion even more relevant. Oil moving back toward $75 for Brent is exactly the kind of supply side inflation shock that complicates Fed decision making. If minutes show officials were already worried about energy prices before Tuesday’s escalation the language will look even more concerning now.
Rate hike by September is back on the table as a real possibility after Tuesday. Fed minutes will either confirm that concern or push back against it. Either way Wednesday is more important than it looked Monday morning.