NEW YORK (AP) — Oil prices are back to jumping on Wednesday, while sinking technology stocks are dragging Wall Street lower ahead of a Federal Reserve decision on what to do with interest rates.
The S&P 500 sank 0.7%. The Dow Jones Industrial Average was down 760 points, or 1.4%, as of 10:30 a.m. Eastern time, and the Nasdaq composite was 1% lower.
The action was stronger in the oil market, where the price of Brent crude leaped 6% to $87.01 per barrel
after fighting resumed in the war with Iran and raised worries about the global flow of oil. Iran launched a barrage of missiles at American forces in the Middle East, while the U.S. military partnered with Saudi Arabia to strike Tehran-backed militias in Iraq.
Brent oil’s price had swung as low as $72 early this month and as high as $102 last week on uncertainty about whether the United States and Iran could reach a deal to allow oil tankers to move freely again from the Middle East to customers worldwide.
The swings have raised worries that inflation will reaccelerate, just when it had begun to slow more than economists expected. That in turn has traders uncertain about what the Federal Reserve will announce after its two-day meeting on interest rates concludes later in the day.
Traders are betting on a roughly 36% probability that the Fed will raise its main interest rate, according to data from CME Group, which would be the first increase in three years. Higher rates can keep a lid on inflation, but they can also slow the economy and undercut prices for stocks and other investments.
Higher rates particularly hurt stocks seen as the most expensive, and scrutiny has already been rising on makers of computer chips and other winners of the frenzy around artificial-intelligence technology.
Unlike many stocks during the dot-com bubble at the turn of the millennium, the surges for AI stock prices are backed by real revenue and profits. But that exceptional growth won't be sustainable if AI does not produce as much profit and productivity as hoped.
The skepticism has hit South Korea’s stock market in particular because it’s dominated by two tech giants, Samsung Electronics and SK Hynix. Seoul’s Kospi index tumbled 6% Wednesday, a day after it plunged 10.8%, and trimmed its gain for the year so far to 34.4%.
SK Hynix’s stock in Seoul dropped 9.6%. It reported record amounts of revenue and profit for a quarter thanks to strong demand because of AI. But its 257% growth in revenue still wasn’t enough to meet analysts’ expectations.
On Wall Street, Nvidia was the heaviest weight on the S&P 500 after the chip company sank 2.6%. Rival Advanced Micro Devices fell 4.4%, and Micron Technology dropped 3.7%.
KLA Corp., whose products and services help make semiconductors, fell 8% even though it reported stronger-than-forecast profit and revenue for the latest quarter. Expectations were high after its stock surged nearly 150% in this year's first six months.
Helping to limit the U.S. stock market's losses was Apple, which rose 0.3%. Analysts say it's almost become an “anti-AI” bet among Big Tech stocks because of its more limited spending on the technology versus rivals.
In stock markets elsewhere around the world, indexes were mixed. Hong Kong’s Hang Seng rose 2%, and Japan's Nikkei 225 fell 1.5% for two of the bigger moves.
In the bond market, Treasury yields rose with oil prices. The yield on the 10-year Treasury climbed to 4.63% from 4.61% late Tuesday. High yields have already sent long-term U.S. mortgage rates to their highest level in nearly a year.
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AP Business Writers Yuri Kageyama and Matt Ott contributed to this report.
