By Stephen Culp and Tharuniyaa Lakshmi
NEW YORK, Oct 8 (Reuters) - Wall Street dipped on Thursday as crude prices surged on a spike in Middle East tensions and a cut in US output that fed inflation and rate-hike fears, while semiconductor stocks slumped.
All three major US stock indexes lost ground, with the tech-heavy Nasdaq down the most.
Chipmakers, which have soared over 80% so far this year, were clear underperformers, falling 3.0%. Investors worried that rising interest rates could become a headwind
to the rapid AI buildout, which has leaned heavily on debt for funding.
"The market is in a state of nervousness due to high oil prices, as it prepares for earnings season which basically starts next week," said Peter Cardillo, chief market economist at Spartan Capital Securities in New York. "That's the excuse for what I believe is profit-taking."
"It's a somewhat cautious market, but 'cautious' is not a dirty word," Cardillo added.
Oil prices jumped on supply concerns after a spate of attacks on shipping in the Strait of Hormuz, combined with a cut in US output due to hurricane activity.
Tight global crude supplies during the Iran war have sent US crude soaring more than 60% so far this year, stoking inflation pressures. In response to those pressures, the US Federal Reserve hiked interest rates in September for the first time since July 2023.
During Thursday's session, benchmark US Treasury yields inched higher, hovering near multi-year highs, while yields on 2-year notes, which tend to reflect Fed rate expectations, moved up more decisively.
Financial markets currently expect the central bank to leave rates unchanged this month, while the probability of a December hike is currently at 67.9%, according to CME's FedWatch tool.
That mirrors the expected rate hike path of the European Central Bank, and was affirmed by Fed Governor Christopher Waller, who said additional rate hikes will probably be necessary, but the timing of those hikes is "flexible."
The Dow Jones Industrial Average fell 34.69 points, or 0.07%, to 51,145.18, the S&P 500 lost 47.95 points, or 0.61%, to 7,753.82 and the Nasdaq Composite lost 378.50 points, or 1.37%, to 27,160.19.
Among the 11 major sectors in the S&P 500, energy stocks led the percentage gainers, while technology, weighed by chips, suffered the steepest loss.
Memory-chip giant Samsung Electronics' record quarterly profit forecast failed to lift sentiment, with its shares closing lower in South Korea. Rival Micron Technology dropped 4.1%.
On Wednesday, the Wall Street Journal reported that Broadcom is lining up $50 billion in financing for OpenAI, with Oracle also seeking an unspecified sum, spurring fears that massive debt issuance by technology companies could intensify the competition for capital.
Broadcom fell 3.9% and Oracle fell 4.9%.
PepsiCo shares gained 2.1% after the beverage company said it would pursue additional spending cuts while lowering its annual core profit forecast.
Starbucks dipped 4.2% following reports that the coffee chain was exploring a purchase of Chipotle Mexican Grill, whose shares jumped 7.3%.
Palantir climbed 1.6% after Goldman Sachs upgraded its rating on the data analytics software provider to "buy" from "neutral".
Advancing issues outnumbered decliners by a 1.07-to-1 ratio on the NYSE. There were 83 new highs and 392 new lows on the NYSE.
On the Nasdaq, 1,882 stocks rose and 2,815 fell as declining issues outnumbered advancers by a 1.5-to-1 ratio.
The S&P 500 posted four new 52-week highs and 12 new lows while the Nasdaq Composite recorded 24 new highs and 285 new lows.
(Reporting by Stephen Culp; Additional reporting by Tharuniyaa Lakshmi and Shashwat Chauhan in Bengaluru; Editing by David Gregorio)
