SpaceX drops 7% on Nasdaq 100 debut as chip stocks drag indexes lower

The S&P 500 fell 0.5% to 7,505 and the Nasdaq Composite dropped 1.2% on Tuesday as chip stocks slid and oil prices jumped after the U.S. revoked Iran's oil export license.

"The combination of Iran-related oil supply risk and profit-taking in semiconductors created a two-way drag that overwhelmed early gains from financials and energy," said Priya Mehta, equity market analyst at Edgen.

The Dow Jones Industrial Average briefly set a new intraday record above 53,000 before reversing to close 0.3% lower. The S&P 500 Energy Sector rose 3%, the day's only gainer among the 11 GICS groups, as Occidental Petroleum, Devon Energy and APA each climbed between 5% and 6%. Industrials fell 2.5% and information technology dropped 2.3%, with Teradyne losing 13% and Sandisk sliding 11%. The Cboe Volatility Index rose to around 18, reflecting increased hedging demand.

The selloff shows how quickly index inclusion can become a sell-the-news event. J.P. Morgan estimated that SpaceX's addition to the Nasdaq 100 would trigger about $4.3 billion in passive buying from index-tracking funds, but with only 3% to 4% of shares publicly traded, the limited float amplified the stock's 6.8% decline. The next catalyst for SpaceX will be its first earnings report as a public company, expected in late July or early August, when lock-up expirations begin.

Chip Stocks Slide After Samsung Stumble

The technology selloff was led by semiconductor names after Samsung Electronics fell 7% in Seoul trading despite reporting preliminary second-quarter results that beat consensus estimates. The decline spilled into U.S. markets, with Nvidia and Broadcom each falling 2%, while Intel and Advanced Micro Devices dropped more than 3%. The VanEck Semiconductor ETF lost 3%. The move coincided with a 7-basis-point rise in the 10-year Treasury yield to 4.54%, which pressured growth stocks by raising the discount rate on future earnings.

Oil Surges as Iran Sanctions Tighten

West Texas Intermediate crude jumped 4.9% to $71.90 a barrel, and Brent crude gained 5.1% to $75.70, after the Treasury Department revoked the waiver allowing Iran to sell its oil. The move followed reports that the Islamic Revolutionary Guard Corps had fired upon vessels near the Strait of Hormuz. The U.S. dollar index rose 0.2% to 101.08, while gold fell 1.2% to $4,115 an ounce as the stronger dollar and higher yields reduced bullion's appeal.

Financials Buck the Trend

The S&P 500 Financials Sector has gained 8% over the past month, neck-and-neck with health care as the best-performing group, as investors position for second-quarter earnings next week. Wells Fargo analyst Mark Mayo said large U.S. lenders are less than halfway through a four-year earnings growth cycle, with the group expected to report earnings up nearly 20% last quarter. Revenue is projected to grow more than 10%, driven by higher net interest income and strong capital markets activity.

This article is for informational purposes only and does not constitute investment advice.