Stan Choe
Slumping AI stocks and another climb in oil prices because of the Iran war are helping to halt Wall Street’s record-setting rally.
The S&P 500 fell 0.6 per cent from its latest all-time high. The Dow Jones, which has less of an emphasis on technology stocks, held up better and was up 28 points, or 0.1 per cent, while the Nasdaq composite fell 1.1 per cent from its own record.
The Australian sharemarket is set to decline, with futures at 4.56am AEST pointing to a loss of 33 points, or 0.4 per cent, at the open. The ASX lost 0.6 per cent on Tuesday. The Australian dollar was trading at US71.85¢.
Stocks in the artificial-intelligence industry led the way lower on Wall Street. Nvidia, whose chips are powering much of the AI revolution, was the heaviest weight on the S&P 500 after sinking 2.5 per cent. Drops of 4.8 per cent for Broadcom and 4.3 per cent for Micron Technology also helped drag the S&P 500 toward what could be its worst day in a month.
The weakness came after a report in The Wall Street Journal said some leaders at OpenAI are concerned about whether it can support its massive spending on data centres after missing targets for new users and revenue. If the maker of ChatGPT pulls back on its investments, it could bolster criticism that the entire AI industry is in a bubble of over-the-top spending that may not produce the profits and productivity that would make it all worth it.
The drops came just a day before several of the biggest spenders on AI are scheduled to report their latest results for the start of 2026. They could offer more clues on whether all the investment in AI is producing the kind of returns that shareholders care about. Alphabet, Amazon, Meta Platforms and Microsoft are all reporting their latest quarterly results on Wednesday.
Also weighing on the stock market was another rise for oil prices on continued uncertainty about what will happen with the Iran war.
The price for a barrel of Brent crude oil to be delivered in June climbed 2.7 per cent to $US111.18. Brent to be delivered in July, which is where traders are focusing more in the oil market, rose 2.6 per cent to $US104.33.
After sitting around $US70 in late February, Brent prices are moving closer to their peak of $US119 reached when worries about the war have been at their heights.
The focus is the Strait of Hormuz, whose effective closure is keeping oil tankers stuck in the Persian Gulf instead of heading to customers worldwide. The Trump administration seemed unlikely Tuesday to accept Iran’s offer to reopen the Strait of Hormuz if the U.S. lifts its blockade on the country.
The proposal would postpone discussions on the Islamic Republic’s nuclear program, something that U.S. Secretary of State Marco Rubio appeared to rule out in a Fox News interview Monday.
Meanwhile, the average price for a gallon of gasoline in the United States reached $4.18 on Tuesday, the most since 2022, according to the auto club AAA.
Expensive fuel was one of the reasons JetBlue Airways reported a worse loss for the start of 2026 than analysts expected.
But its stock nevertheless rose 2.3 per cent after CEO Joanna Geraghty said the airline saw demand from customers strengthening through the quarter. JetBlue meanwhile announced moves it’s making to rein in fuel costs, such as cutting some flying.
Also helping to limit Wall Street’s losses was Coca-Cola. Its stock rallied 5.7 per cent after it reported stronger profit and revenue for the latest quarter than analysts expected, thanks in part to strength from China, the United States and India.
In the bond market, Treasury yields held relatively steady after a report showed U.S. consumers are feeling slightly more confident in April, when economists expected to see a decline. The yield on the 10-year Treasury rose to 4.36 per cent from 4.35 per cent late Monday.
On Wednesday, the Federal Reserve is scheduled to announce its latest decision on short-term interest rates. The widespread expectation is that it will hold the federal funds rate steady and hold off on resuming its cuts. Lower interest rates would help the economy, but they also risk worsening inflation when oil is expensive and tariffs are threatening to push prices higher.
Also on Wednesday, the Senate Banking Committee will vote on whether to confirm President Donald Trump’s nominee, Kevin Warsh, to succeed Fed Chair Jerome Powell. The committee is expected to approve Warsh and send his nomination to the full Senate.
In stock markets abroad, indexes were mixed in Europe and fell in Asia.
Japan’s Nikkei 225 sank 1 per cent for one of the world’s larger losses after the Bank of Japan opted in a split vote to keep its key interest rate unchanged.
“There are various risks to the outlook,” it said in a statement. “For the time being it is necessary to pay particular attention to the impact of the future course of the situation in the Middle East.”
AP
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