US Stocks Slip as Oil Prices Surge and Chip Sector Faces Pressure

US equities declined on Thursday as crude oil prices climbed sharply following escalating tensions in the Middle East and a reduction in US oil production linked to hurricane disruptions. These factors raised concerns about inflation and potential interest rate increases, which weighed heavily on technology and semiconductor stocks.

The S&P 500 dropped 36.07 points, or 0.46 percent, closing at 7,765.70. The Nasdaq Composite experienced a sharper decline, falling 341.59 points or 1.24 percent to 27,197.10. Meanwhile, the Dow Jones Industrial Average inched up 45.68 points, or 0.09 percent, to finish at 51,225.48.

The tech-heavy Nasdaq suffered the largest percentage loss among major indexes, coming two days after it reached a record closing high. Semiconductor companies, which have surged more than 80 percent this year, were notably weak. A Financial Times report revealing that OpenAI’s annualized revenues were $20 billion lower than previously indicated contributed to investor caution in the sector.

Market strategist Terry Sandven from US Bank Wealth Management in Minneapolis highlighted that investors are currently adopting a wait-and-see approach ahead of the third-quarter earnings season, which starts next week. He noted that the ongoing conflict in Iran is driving oil prices higher, adding an extra layer of uncertainty. Despite these developments, Sandven pointed out that the broader trend for equities this year has remained upward.

Oil prices jumped significantly amid supply worries spurred by attacks on shipping vessels in the Strait of Hormuz and a cutback in US production caused by hurricane-related disruptions. Front-month West Texas Intermediate (WTI) crude settled 3.6 percent higher, while Brent crude gained 4.1 percent. The conflict in Iran and related geopolitical risks have tightened global oil supplies, pushing US crude prices up over 60 percent so far this year, intensifying inflation pressures across the economy.

The US Federal Reserve responded to these inflationary concerns by increasing interest rates in September for the first time since July 2023. On Thursday, benchmark US Treasury yields nudged higher, hovering near multi-year peaks. Yields on 2-year notes, which often reflect expectations for Federal Reserve policy, rose more sharply, signaling anticipation of future rate adjustments.

Financial markets currently project the Federal Reserve will hold rates steady this month, but there is nearly a 70 percent chance of a rate hike in December, according to the CME FedWatch tool. This outlook aligns with expectations for the European Central Bank’s monetary policy. Fed Governor Christopher Waller recently indicated that more rate hikes are likely necessary, though their timing remains flexible.

In corporate news, Samsung Electronics forecasted a record quarterly profit, yet this did not boost investor sentiment, and its shares closed lower in South Korea. The Wall Street Journal reported that Broadcom is arranging $50 billion in funding for OpenAI, with Oracle also seeking unspecified financing. This raised concerns about increased debt issuance within the technology sector potentially intensifying competition for capital. Both Broadcom and Oracle shares ended the trading day lower.

On the consumer front, PepsiCo shares gained after the company announced plans to implement additional cost-cutting measures and lowered its annual core profit forecast. Starbucks shares fell following reports that the coffee chain is considering acquiring Chipotle Mexican Grill, whose stock price rose on the news. Palantir Technologies advanced after Goldman Sachs upgraded its rating from neutral to buy, citing positive prospects for the data analytics firm.

This market activity underscores the interplay between global geopolitical events, corporate earnings expectations, and monetary policy outlooks that currently influence investor decisions. With earnings season approaching, traders and analysts will closely monitor developments in these areas for clues about the direction of the US stock market in the coming months.