Stocks Fall on AI, War Worries Before Fed Decision: Markets Wrap
(Bloomberg) — Wall Street traders gearing up for the Federal Reserve decision sent stocks lower as oil jumped, with the market also bracing for results from two of the biggest artificial-intelligence spenders.
A resurgence in Middle East violence drove Brent crude above $90, stoking concerns about inflation, lifting bond yields and dimming the appetite for riskier assets. Another rout in chipmakers dragged down the S&P 500. The Nasdaq 100 lost 1%. Microsoft Corp. and Meta Platforms Inc.’s upcoming earnings will test investors’ diminishing patience for massive AI investments.
President Donald Trump told Fox News the US would hit Iran hard after a recent attack that targeted a military base in Jordan. The latest clashes underscore how far Washington and Tehran are from formally restarting peace negotiations, let alone agreeing on a deal to permanently end their war and revive the Strait of Hormuz.
The strikes also added more uncertainty to the outlook for monetary policy. The Fed is expected to hold interest rates steady when it concludes a two-day meeting on Wednesday, and some traders are eyeing the possibility of a surprise increase as patience with high inflation wears thin.
“This meeting arrives with heightened uncertainty amid renewed energy price gains and lingering concerns about persistent inflation pressures,” said Angelo Kourkafas at Edward Jones. “We believe the softer June consumer and producer inflation readings give the Fed some breathing room.”
The Fed will release a statement at 2 p.m. in Washington, and Chair Kevin Warsh is due to hold a press conference 30 minutes later.
“The focus will turn to the Fed’s rate announcement and Chairman Warsh’s press conference today, but the tech sector is still the most important issue on the docket for investors this summer,” said Matt Maley at Miller Tabak.
Despair and frustration spread across the South Korean retail-investing community as stocks cratered again Wednesday, extending the decline in the nation’s key equity index this month to a record 33%.
The Kospi Index slid as much as 13% in a hectic morning session, triggering a circuit breaker. SK Hynix Inc. earmarked at least $31 billion in capital spending this year after reporting a six-fold surge in quarterly profit, a record outlay that coincides with fears about investments in AI capacity.
“The decline in the chip stocks and the dramatic fall in South Korea’s Kospi are clear warning signs for US investors,” Maley said. “If history is any guide, these developments could be important examples of a canary in the coal mine.”
Corporate Highlights:
Ford Motor Co. raised its profit outlook for the second time this year as consumers continue to snap up the automaker’s high-margin sport-utility vehicles. Procter & Gamble Co. gave a conservative outlook and its results missed estimates, highlighting the challenges the maker of Downy fabric softener and Febreze air fresheners faces as consumers retrench. Caterpillar Inc. fell after Baird cut its recommendation on the industrial giant, warning of a growing push to restrict the data-center buildout that has driven much of the company’s recent growth. Humana Inc. spent more on medical expenses in the second quarter in its insurance segment than Wall Street anticipated, the latest worrying sign for an industry managing increasing costs. Biogen Inc. reported earnings that beat analysts’ expectations as sales of newly acquired kidney and eye-disease drugs helped offset declining revenue from multiple sclerosis medicines. What Bloomberg Strategists say…
“Investor reaction to Meta and Microsoft earnings will tell us a lot about how the consensus view on AI spending has shifted.”
—Sebastian Boyd, Macro Strategist, Markets Live. For the full analysis, click here.
Some of the main moves in markets:
Stocks
The S&P 500 fell 0.7% as of 1:09 p.m. New York time The Nasdaq 100 fell 1% The Dow Jones Industrial Average fell 1.4% The MSCI World Index fell 0.5% Currencies
The Bloomberg Dollar Spot Index was little changed The euro was little changed at $1.1388 The British pound was little changed at $1.3291 The Japanese yen was little changed at 163.89 per dollar Cryptocurrencies
Bitcoin fell 0.3% to $63,646.75 Ether fell 1.2% to $1,893.89 Bonds
The yield on 10-year Treasuries advanced four basis points to 4.65% Germany’s 10-year yield advanced six basis points to 3.16% Britain’s 10-year yield advanced nine basis points to 5.04% Commodities
West Texas Intermediate crude rose 6.7% to $84.54 a barrel Spot gold rose 0.2% to $4,039.52 an ounce ©2026 Bloomberg L.P.
