Nasdaq drops 2%, Dow loses 950 points as Trump threatens Iran, Nvidia-led tech rout worsens – Firstpost

Wall Street suffered another sharp selloff on Wednesday as renewed tensions between the United States and Iran, rising inflation concerns and a deepening technology-sector correction rattled investors, wiping an estimated $1.1 trillion off the value of US equities in a single session.

The Dow Jones Industrial Average plunged 953.33 points, or 1.87 per cent, to close at 49,918.78. The S&P 500 fell 119.66 points, or 1.62 per cent, to 7,266.99, while the Nasdaq Composite dropped 509.32 points, or 1.98 per cent, to 25,169.50.

The losses extended a broader market retreat that has accelerated since early June. The S&P 500 is now down roughly 4.5 per cent from its June 2 record high, translating into an estimated $3.3 trillion erosion in market value over the period as investors reassess risks surrounding artificial intelligence stocks, interest rates and geopolitical tensions.

Iran tensions unsettle markets

Investor sentiment also deteriorated after President Donald Trump warned that the United States would strike Iran again if a peace agreement is not reached.

The comments followed one of the most significant exchanges of hostilities between Washington and Tehran in recent months, raising fears that the conflict could escalate further and disrupt global energy supplies.

The geopolitical uncertainty pushed oil prices higher, adding to concerns about inflation and economic growth. Brent crude and US crude both gained sharply as traders priced in the risk of further disruptions around the Strait of Hormuz, a critical shipping route for global energy markets.

Inflation and rate fears return

Adding to market anxiety, fresh economic data showed US consumer prices rose 4.2 per cent in May from a year earlier, the fastest pace since April 2023.

The increase was largely driven by higher energy costs linked to the West Asia conflict. While the figure matched economists’ expectations, it reinforced concerns that inflation remains stubbornly high.

Investors now expect the Federal Reserve to keep interest rates unchanged at its upcoming meeting but increasingly believe another rate hike could arrive before the end of the year. Stronger-than-expected jobs data released last week has further reduced hopes for near-term monetary easing.

AI trade loses momentum

The latest decline extends a difficult period for technology and AI-related shares.

The Nasdaq has come under pressure in recent sessions as investors take profits from some of the market’s biggest winners. Analysts say the AI-driven rally that powered Wall Street to record highs is facing its toughest test yet as valuations, rising interest-rate expectations and geopolitical risks collide.

Super Micro Computer, one of the biggest beneficiaries of the AI boom, plunged 28 per cent after announcing plans to raise $7 billion through equity and equity-linked financing transactions to support expanding AI server demand. Oracle shares also slipped after the company released quarterly results.

More than $3 trillion erased since June peak

The latest decline underscores how quickly sentiment has shifted on Wall Street after months of AI-fuelled gains.

According to market estimates, Wednesday’s selloff alone wiped out about $1.1 trillion in US stock market value. Since the S&P 500 reached a record high on June 2, investors have seen approximately $3.3 trillion erased from equity valuations.

The reversal has been particularly painful for technology stocks, which had driven much of the market’s rally over the past year. The S&P 500 Information Technology sector has now fallen 11 per cent from its recent peak, officially entering correction territory.

Analysts say investors are increasingly rotating out of expensive growth stocks and into more defensive sectors as concerns mount over persistent inflation, the possibility of higher interest rates and escalating tensions in West Asia.

Fear gauge rises

Signs of investor nervousness were visible across markets.

The Cboe Volatility Index, often referred to as Wall Street’s “fear gauge”, rose for a second straight session, reflecting growing uncertainty over the outlook for stocks. Trading volume remained elevated as declining stocks significantly outnumbered advancing ones on both the New York Stock Exchange and the Nasdaq.

Market strategists say investors are now grappling with three major risks simultaneously: a technology-sector correction, persistent inflation and the possibility of a broader geopolitical escalation involving Iran.

With the Federal Reserve meeting approaching and tensions in West Asia showing little sign of easing, analysts warn that volatility could remain elevated through the summer months.