Tech stocks drag Nasdaq down nearly 1% as Middle East tensions, inflation fears weigh

Wall Street closed mixed Tuesday as volatility in AI-related technology stocks collided with renewed geopolitical tensions in the Middle East.

The Dow Jones Industrial Average edged up 86.10 points, or 0.17 percent, to close at 50,872.11 on the New York Stock Exchange. The S&P 500 fell 19.08 points, or 0.26 percent, to 7,386.65, while the Nasdaq Composite tumbled 250.84 points, or 0.97 percent, to 25,678.82.

The Philadelphia Semiconductor Index, which had rebounded Monday on bargain buying, surged more than 3 percent at the open before a wave of selling drove it down as much as 8.6 percent during trading.

Major technology stocks also weakened. Broadcom fell 3.02 percent, Nvidia dropped 1.97 percent, and Apple slid 3.95 percent.

The market's lukewarm reception to the AI platform Apple unveiled Monday weighed on investor sentiment across the broader technology sector.

Ahead of Elon Musk's SpaceX initial public offering scheduled for this week, institutional investors were also reallocating capital — trimming positions in large-cap technology stocks to free up funds for the sizable share offering.

Middle East developments added to market unease. President Donald Trump claimed Iran had shot down a US military helicopter patrolling the Strait of Hormuz and signaled the possibility of a forceful response.

Oil prices fell, however, on expectations of a supply normalization. Brent crude futures for August delivery dropped 2.97 percent to $91.45 a barrel, while West Texas Intermediate for July delivery fell 3.40 percent to $88.20 a barrel.

US Energy Secretary Chris Wright said the number of vessels transiting the Strait of Hormuz had been increasing "very meaningfully" in recent days. Kuwait's offer of additional crude supply to Asian refiners also helped ease supply concerns.

Demand for safe-haven assets pushed government bond prices higher. The yield on the 10-year US Treasury note fell 3 basis points to 4.53 percent.

Spot gold fell 1.7 percent from the previous session to $4,256.16 per ounce.

"After the early rally lost steam, selling spread across the broader market," said Michael O'Rourke, chief market strategist at JonesTrading. "A rotation from technology growth stocks into value stocks is playing out at the same time as a correction of the gains that had accumulated over the prior period."

Investor attention is now turning to the US Consumer Price Index for May, due out Wednesday. The data could reshape expectations for the Federal Reserve's interest rate path, depending on how much the rise in energy prices stemming from the Iran conflict has fed through to consumer prices.