Chip Stocks Sink as Inflation Woes Boost US Yields: Markets Wrap
(Bloomberg) — A selloff in high-flying chipmakers drove stocks lower, with the market also falling alongside bonds after inflation data showed the impacts of energy disruptions stemming from the war in Iran.
The faster-than-estimated core consumer price index halted a rally in equities, with the S&P 500 dropping from a record. The Nasdaq 100 slid almost 1%. A gauge of semiconductor firms sank 3%. Renewed inflation worries spurred an increase in Treasury yields, with traders boosting bets on a Federal Reserve interest-rate hike in 2027. US crude topped $102.
A blistering run in stocks from war-driven lows started showing signs of overheating, particularly in the group of tech companies that had powered gains. The nearly 70% surge in chipmakers in just six weeks had spurred calls for a break at a time when the Iran conflict threatens to slow growth and fan inflation.
“After such a powerful earnings-driven rally, equities may simply need a breather,” said Bret Kenwell at eToro. “While the labor market and broader economy still look stable — if not exactly robust — a disjointed Fed and rising inflation complicate matters.”
US inflation accelerated in April on rising gasoline and grocery costs, exceeding wage growth in a double-whammy for already strained consumers. The CPI rose 3.8% from a year earlier, the most since 2023. The core gauge, which excludes food and energy, increased 2.8%.
“Inflation is roaring back — largely driven by stubbornly high oil prices — which will dominate the inflation story for the rest of the year as the conflict continues to unfold in the Middle East,” said Skyler Weinand at Regan Capital.
Given that inflation is heading in the wrong direction and the labor market is holding up, it’s very unlikely that the Fed will be able to lower rates any time soon, according to Chris Zaccarelli at Northlight Asset Management.
“The increase in the core CPI suggests high energy prices are making themselves felt throughout the economy,” said Ellen Zentner at Morgan Stanley Wealth Management. “It doesn’t mean the Fed will pivot to rate hikes, but it does reinforce the reality that new Fed leadership won’t result in an immediate dovish shift.”
The flip side is that markets had already priced out rate cuts for 2026 heading into the report, noted Tim Urbanowicz at Innovator ETFs from Goldman Sachs Asset Management. As long as the 10-year Treasury yield remains contained below 4.5%, it shouldn’t be a meaningful headwind for equities, he added.
On the geopolitical front, President Donald Trump said he would prioritize trade discussions during his summit with Chinese counterpart Xi Jinping this week, and downplayed the amount of attention they would devote to the Iran war.
Elsewhere, UK bonds tumbled amid a political drama that’s adding pressure to a market already battered by the country’s fiscal issues. Prime Minister Keir Starmer survived in post into Tuesday evening despite a slew of ministerial resignations which have so far failed to force his downfall.
Corporate Highlights:
Biotech companies climbed as President Donald Trump said US Food and Drug Administration Commissioner Marty Makary is resigning. Alphabet Inc.’s Google is in talks with Elon Musk’s SpaceX to launch the search company’s orbital data centers, the Wall Street Journal reported. Wendy’s Co. jumped after the Financial Times reported that Nelson Peltz’s Trian Fund Management is seeking investor backing for a bid to take the firm private. Under Armour Inc. sank as its guidance for this year missed Wall Street projections, weighed down by exiting a partnership with NBA star Stephen Curry and a financial hit from the conflict in the Middle East. Hims & Hers Health Inc. reported a first-quarter loss and sales that missed Wall Street estimates as it faces higher costs associated with its strategic pivot to branded weight-loss medications. What Bloomberg strategists say…
“With consumers losing their discretionary firepower as well as their confidence, optimistic earnings projections for the remainder of the year will come into question.”
—Tatiana Darie, Macro Strategist, Markets Live. For the full analysis, click here.
Some of the main moves in markets:
Stocks
The S&P 500 fell 0.2% as of 4 p.m. New York time The Nasdaq 100 fell 0.9% The Dow Jones Industrial Average rose 0.1% The MSCI World Index fell 0.3% Currencies
The Bloomberg Dollar Spot Index rose 0.3% The euro fell 0.4% to $1.1740 The British pound fell 0.5% to $1.3539 The Japanese yen fell 0.3% to 157.64 per dollar Cryptocurrencies
Bitcoin fell 1.2% to $80,821.23 Ether fell 2.2% to $2,285.05 Bonds
The yield on 10-year Treasuries advanced five basis points to 4.46% Germany’s 10-year yield advanced six basis points to 3.10% Britain’s 10-year yield advanced 10 basis points to 5.10% Commodities
West Texas Intermediate crude rose 4.4% to $102.35 a barrel Spot gold fell 0.4% to $4,717.38 an ounce ©2026 Bloomberg L.P.
