Overview
Major U.S. technology stocks started the week with notable declines, dragging the S&P 500 and Nasdaq lower on Monday. Alphabet and Amazon each fell by about 5% as investors balanced concerns over interest rate expectations against the sector's heavy AI-related spending and rising corporate debt loads. In a related market move, SpaceX disclosed plans to raise debt and suffered its largest single-day share decline since its IPO, dropping roughly 16%.
Equities and themes
Monday’s market action again highlighted a recurring theme: investors have been favoring companies that stand to benefit from heavy AI investment while selling those perceived to be the primary spenders on AI. Chipmakers bucked the broader tech weakness, with the group performing better ahead of memory chipmaker Micron’s results, which are due Wednesday.
The prospect of a more hawkish Federal Reserve also weighed on sentiment. Market pricing now fully reflects a rate increase penciled in for September, with the odds of two hikes before year-end estimated at greater than 50%, a dynamic that pushed broad markets lower.
In pre-market activity, Wall Street futures were softer, with Nasdaq futures tumbling more than 2% before the opening bell. Global technology shares followed the U.S. drop, and South Korea’s KOSPI index fell sharply - off nearly 10% on Tuesday - in part on renewed warnings about the ongoing weakness of the Korean won.
Currency and central bank signals
The U.S. dollar remained strong, and the Japanese yen continued to trade near 40-year lows first reached two years ago. That dollar strength, driven by U.S. rate expectations, appeared to outpace the impact of last week’s Bank of Japan rate hike. Reports of contact between Tokyo and Washington over yen stability kept concerns about potential market intervention alive.
Energy and commodities
Oil prices continued their descent, slipping below $80 per barrel early on Tuesday. Brent crude was trading around $77 per barrel as markets absorbed signs that oil flows through the Strait of Hormuz were returning. The United States also announced a 60-day waiver on sanctions related to Iran on Monday following initial peace talks, a development that coincided with the latest fall in crude.
Notable corporate stock moves
SpaceX’s stock story drew particular attention. After its recent listing, the shares reversed all of their initial trading gains and moved below the first public trade price following a near 17% intraday decline on Monday. Although the stock remained about 14% above its $135 listing price on Monday, it gave up additional ground, ticking down further in after-hours trading. The rapid reversal raises questions for retail investors who invested heavily in the stock during last week’s activity and challenges the company’s elevated market valuation.
Political developments and market reaction
In the United Kingdom, the resignation of Prime Minister Keir Starmer on Monday left markets largely unruffled. Attention is now on how quickly his likely successor, Andy Burnham, can be confirmed and who Burnham may select as finance minister. So far, UK markets have registered only limited immediate volatility around the leadership change.
Data and events to watch
Market participants will be watching the flash U.S. and global business surveys for June, scheduled for release on Tuesday. It is worth noting that the sharp decline in oil prices that followed last week’s U.S.-Iran memorandum of understanding occurred after those surveys were conducted.
Other events on the near-term calendar include a U.S. two-year note auction later in the day.
Chart of the day
SpaceX’s shares reversed their early post-IPO gains after Monday’s nearly 17% fall, undercutting the initial print from the stock’s debut and amplifying concern among investors who had loaded into the name last week.
Summary of market tone
The combination of concentrated selling in large-cap technology stocks, a firming U.S. interest rate outlook and currency strains in Asia produced a risk-off tone across global markets. At the same time, pockets of strength remained in areas expected to benefit from AI investment, while energy markets reacted to developments in the Middle East and diplomatic actions affecting Iran.
Today’s events to watch
- U.S. June S&P Global PMIs - 9:45 a.m. EDT
- U.S. two-year note auction - 1:00 p.m. EDT
Opinions and interpretation in this summary reflect the analysis presented; they are not endorsements or investment advice.