Stocks Indexes Finish Mostly Lower as Chipmakers Retreat

The S&P 500 Index ($SPX) (SPY) on Tuesday closed down -0.57%, the Dow Jones Industrial Average ($DOWI) (DIA) closed up +0.64%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down -1.89%.  June E-mini S&P futures (ESM26) fell -0.60%, and June E-mini Nasdaq futures (NQM26) fell -1.87%. 

Stock indexes settled mixed on Tuesday, with the Dow Jones Industrials posting a new all-time high.  The weakness of chipmakers weighed on the broader market Tuesday, along with a slide in energy producers after crude oil prices plunged.  Also, weakness in software stocks weighed on the overall market. In addition, Tuesday’s weaker-than-expected US housing starts and building permits reports were negative for stocks.

Stocks found some support on Tuesday as crude oil prices dropped another -5% to a 3.5-month low, easing inflation expectations.  Stocks have carryover support from Monday’s surge after the US and Iran agreed to end their war and reopen the Strait of Hormuz, stoking risk-on sentiment in asset markets.  The 10-year T-note yield fell -5 bp to 4.42%.

The market’s focus will turn to the 2-day FOMC meeting that began on Tuesday, the first under the leadership of new Fed Chair Kevin Warsh. While the Fed is expected to keep interest rates unchanged, the spotlight will be on how Mr. Warsh navigates the post-meeting press conference and the outlook for inflation.

US May housing starts fell -15.4% m/m to a 6-year low of 1.177 million, weaker than expectations of 1.430 million.  May building permits, a proxy for future construction, fell -0.7% m/m to 1.413 million, weaker than expectations of 1.418 million.

The US May import price index ex-petroleum rose +0.8% m/m, stronger than expectations of +0.5% m/m.

WTI crude oil prices (CLN26) sank more than -5% on Tuesday to a 3.5-month low due to the US-Iran deal to reopen the Strait of Hormuz, boosting expectations for a revival in oil supplies. Losses in crude oil accelerated Tuesday afternoon when the Wall Street Journal reported that the US-Iran peace deal would allow Iran to sell crude oil immediately.  Goldman Sachs on Tuesday cut its price forecast on Brent crude to $80 a barrel in Q4 of this year, down from $90 a barrel, and said it expects Persian Gulf crude exports to return to pre-war levels by the end of July, one month earlier than previously expected. 

The markets are discounting a 5% chance of a +25 bp rate hike at the conclusion of the Tue/Wed FOMC meeting.

Overseas stock markets settled mixed on Tuesday.  The Euro Stoxx 50 closed up +0.45%.  China's Shanghai Composite fell from a 1.5-week high and closed down -0.11%.  Japan’s Nikkei-225 Stock Average rose to a new all-time high and closed up +0.13%.

Interest Rates

September 10-year T-notes (ZNU6) on Tuesday closed up +9 ticks, and the 10-year T-note yield fell -5.1 bp to 4.422%.  Sep T-notes on Tuesday matched Monday’s 2-week low, and the 10-year T-note yield matched Monday’s 2-week low of 4.418%. T-notes rallied on Tuesday after WTI crude oil prices plunged more than -5% to a 3.5-month low, which has reduced inflation expectations and is bullish for T-notes.  Also, Tuesday’s weaker-than-expected US May housing starts and building permits reports were supportive of T-notes.  In addition, markets are hoping for a less hawkish FOMC meeting this week, given that oil prices should decline over time if the Strait of Hormuz reopens as expected. 

European government bond yields moved lower on Tuesday.  The 10-year German bund yield fell to an 8-week low of 2.920% and finished down -2.4 bp to 2.930%.  The 10-year UK gilt yield fell -2.4 bp to 4.788%.

Eurozone Q1 labor costs were revised downward to +3.2% y/y from the previously reported +3.4% y/y.

The German Jun ZEW survey expectations of economic growth rose +20.7 to a 4-month high of 10.5, stronger than expectations of -5.5.

Swaps are discounting an 18% chance of a +25 bp ECB rate hike at its next policy meeting on July 23.

US Stock Movers

Chipmakers retreated on Tuesday, weighing on the broader market.  Marvell Technology (MRVL) closed down more than -9% to lead losers in the Nasdaq 100, and Intel (INTC) closed down more than -8%.  Also, Advanced Micro Devices (AMD) and KLA Corp (KLAC) closed down more than -7%, and  Micron Technology (MU) closed down more than -6%.  In addition, Lam Research (LRCX) closed down more than -5%, and Microchip Technology (MCHP), ASML Holding NV (ASML), Broadcom (AVGO), and NXP Semiconductors NV (NXPI) closed down more than -4%.  Finally, ARM Holdings NV (ARM), Applied Materials (AMAT), and Qualcomm (QCOM) closed down more than -3%. 

Software stocks fell on Tuesday, a negative factor for the overall market.  Atlassian Corp (TEAM) closed down more than -3%, and ServiceNow (NOW), Oracle (ORCL), and Workday (WDAY) closed down more than -2%.  Also, Microsoft (MSFT), Salesforce (CRM), Datadog (DDOG), and Palantir Technologies (PLTR) closed down more than -1%.

Cybersecurity stocks were under pressure on Tuesday, weighing on the broader market.  Zscaler (ZS) closed down more than -2%, and Okta (OKTA), Fortinet (FTNT), CrowdStrike Holdings (CRWD), Palo Alto Networks (PANW), and Cloudflare (NET) closed down more than -1%. 

Energy stocks and service providers moved lower on Tuesday as WTI crude oil fell more than -5% to a 3.5-month low.  Haliburton (HAL) closed down more than -2%, and APA Corp (APA), Valero Energy (VLO), Baker Hughes (BKR), ConocoPhillips (COP), Diamondback Energy (FANG), Devon Energy (DVN), and Occidental Petroleum (OXY) closed down more than -1%. 

Huntsman (HUN) closed down more than -17% after agreeing to merge with Olin in an all-stock merger of equals.

Dave & Buster’s Entertainment (PLAY) closed down more than -6% after reporting Q1 revenue of $559.2 million, weaker than the consensus of $580.3 million.

Huson Pacific Properties (HPP) closed down more than -3% after Bank of America Global Research downgraded the stock to underperform from neutral with a price target of $14.

Tractor Supply Co (TSCO) closed down more than -2% to lead losers in the S&P 500 after several analysts cut their price targets on the stock. 

Take-Two Interactive Software (TTWO) closed up more than +6% to lead gainers in the S&P 500 and Nasdaq 100 after Piper Sandler estimated the company would have 46 million unit sales of Grand Theft Auto VI when the game launches.

Space Exploration Technologies (SPCX) closed up more than +4%, adding to the +37% gain over the past two sessions on positive carryover from its record $75 billion initial public offering (IPO) late last week, which was more than four times oversubscribed, indicating strong demand for the stock. 

Valmont Industries (VMI) closed up more than +2% after projecting a goal of $5.4 billion in organic net sales and an EPS target of $35 by the end of 2029. 

Edwards Lifesciences (EW) closed up more than +2% after the US government published a coverage proposal for transcatheter aortic valve replacement, a positive development for the company.   

Earnings Reports(6/17/2026)

CarMax Inc (KMX), Jabil Inc (JBL), Safe Bulkers Inc (SB), Smith & Wesson Brands Inc (SWBI).