US stocks fell on Wednesday after Iran launched surprise attacks against the US, and as investors counted down to the Federal Reserve’s policy decision and earnings from two big spenders on AI.
The S&P 500 (^GSPC) lost 0.8%, and the tech-heavy Nasdaq Composite (^IXIC) dropped 1.1%. The Dow Jones Industrial Average (^DJI), which includes fewer tech stocks, fell by a steeper 1.5%, or over 800 points, as oil prices rose amid renewed tensions in the Middle East.
SK Hynix’s (000660.KS, SKHY) second quarter profit rose by 557% year over year, the company reported after the US market close on Tuesday. That was less than Wall Street expected, prompting concerns that the artificial intelligence boom may be slowing. In Asia, investors once again dumped chip stocks such as Samsung (005930.KS) and SK Hynix, driving the KOSPI Composite (^KS11) down nearly 6% on Wednesday.
Two “Magnificent Seven” quarterly results stand as another big catalyst for the AI trade, with reports from Microsoft (MSFT) and Meta (META) dropping after the bell. It could be a make-or-break moment for tech stocks after Alphabet’s (GOOG, GOOGL) capital expenditure guidance last week spooked markets, resurfacing fears about the AI boom’s sustainability.
In the Middle East conflict, Iran launched an “attempted surprise attack” on Tuesday, according to US Central Command, reengaging fighting between the US and Iran for the first time since a pause in hostilities on Friday. Oil prices jumped, with Brent crude (BZ=F) gaining more than 7% to trade back over $90 per barrel.
The strikes come ahead of the Federal Reserve’s interest rate decision at 2:00 p.m. ET, a pivotal moment when the central bank either holds rates steady or raises them for the first time in three years. Traders’ expectations lean toward the Fed keeping rates unchanged, but persistently high inflation and Chairman Kevin Warsh’s measures to clamp down on Fed communications have left the door open for a hike.
Aside from the Big Tech updates, markets will be treated to a slew of quarterly updates from consumer-facing companies, including Starbucks (SBUX), Chipotle Mexican Grill (CMG), and AI-exposed Qualcomm (QCOM) and Arm Holdings (ARM) results after the bell. Shares in Procter & Gamble (PG) sold off on Wednesday morning after the company reported revenue below expectations.