Tech Sector Pullback May Weigh On Wall Street

(RTTNews) - The major U.S. index futures are currently pointing to a lower open on Tuesday, with stocks likely to give back ground following the strength seen in the previous session.

After helping to lead the markets higher during Monday's trading, technology stocks are likely to come under pressure early in the session.

The downward momentum for the tech sector comes following a nearly 7 percent plunge by shares of South Korean memory chipmaker Samsung Electronics.

Samsung reported a 19-fold spike in second quarter profits, but the company's stock tumbled amid concerns about spending and demand.

"Although Samsung's results were stellar, investors are getting nervous about the scale of money ploughing into AI and whether it's a bubble waiting to burst," said Dan Coatsworth, head of markets at AJ Bell.

A report from Reuters indicating Chinese startup DeepSeek is developing its own AI chip may also weigh on semiconductor stocks.

Following the long Independence Day weekend, stocks moved mostly higher during trading on Monday. The major averages all moved to the upside, with the Dow reaching a new record closing high.

The tech-heavy Nasdaq led the way higher, jumping 288.49 points or 1.1 percent to 26,121.16. The S&P 500 also advanced 54.19 points or 0.7 percent to 7,537.43, while the Dow rose 155.84 points or 0.3 percent to 53,055.91.

The upward move on Wall Street came amid strength among technology stocks, with computer hardware stocks turning in some of the best performances.

Reflecting the strength in the computer hardware sector, the NYSE Arca Computer Hardware Index shot up by 3.4 percent.

Shares of Dell Technologies (DELL) spiked by 4.4 percent after President Donald Trump promoted the company's computers in an Oval Office ceremony ringing the opening bell for the markets.

Substantial strength was also visible among networking and semiconductor stocks, with the NYSE Arca Networking Index and the Philadelphia Semiconductor Index surging by 2.8 percent and 2.2 percent, respectively.

Outside of the tech sector, brokerage stocks showed a strong move to the upside, driving the NYSE Arca Broker/Dealer Index up by 2.1 percent.

Banking and steel stocks also saw considerable strength on the day, while pharmaceutical, telecom, housing and utilities stocks showed notable moves to the downside.

In U.S. economic news, the Institute for Supply Management released a report showing growth in U.S. service sector activity slowed slightly in the month of June.

The ISM said its services PMI edged down to 54.0 in June after rising to 54.5 in May, although a reading above 50 still indicates growth. The modest decrease matched economist estimates.

Commodity, Currency Markets

Crude oil futures are climbing $0.46 to $69.01 a barrel after slipping $0.14 to $68.55 a barrel on Monday. Meanwhile, after jumping $41.80 to $4,167.50 ounce in the previous session, gold futures are rising $10.60 to $4,178.10 an ounce.

On the currency front, the U.S. dollar is trading at 161.82 yen compared to the 162.08 yen it fetched at the close of New York trading on Monday. Against the euro, the dollar is trading at $1.1437 compared to yesterday's $1.1440.

Asia

Asian stocks declined on Tuesday as investors rotated out of AI chip stocks on doubts over the sustainability of the AI boom.

As rising capital expenditures and competition become synonymous with rising semiconductor demand, investors are questioning the sustainability of record earnings.

Investors also awaited the U.S. Federal Reserve's meeting minutes and the start of the second-quarter U.S. earning season this week to gauge the outlook for consumer demand.

Ahead of the release of last month's Fed meeting minutes under new Chair Kevin Warsh on Wednesday, Fed Governor Chritopher Waller, in his assessment of inflation targeting, said that forward guidance can be a "valuable tool" but overly rigid commitments can hinder the Fed's ability to respond to changing data.

The U.S. dollar and Treasury yields rose in Asian trading, sending gold prices lower toward $4,100 on ounce.

Brent crude futures rose more than 1 percent toward $73 a barrel, reaching a one-week high after a vessel navigating off Oman's coast in the Strait of Hormuz was struck by a projectile, renewing concerns among shipowners and raising questions over the durability of the U.S.-Iran peace agreement.

China's Shanghai Composite Index ended 1.3 percent lower at 3,990.24 despite authorities in Beijing and Hong Kong unveiling a broad package of measures to boost financial connectivity and yuan internationalization. Hong Kong's Hang Seng Index fell 0.5 percent to 23,496.89.

Japanese markets tumbled, dragged down by semiconductor heavyweights. The Nikkei 225 Index plunged 2.1 percent to 68,256.96, while the broader Topix Index settled 1 percent lower at 4,062.26.

Among the prominent decliners, Advantest dropped 2.3 percent, Tokyo Electron lost 3.9 percent and Kioxia Holdings slumped 11.3 percent.

Seoul stocks nosedived due to weakness in the tech sector. The Kospi Index plummeted 4.9 percent to 7,656.31 on concerns over high AI-related stock valuations.

Shares of Samsung Electronics slumped 6.9 percent despite the world's largest memory chipmaker reporting a 19-fold jump in second quarter operating profit from a year earlier, fueled by soaring demand for memory chips needed in AI data centers.

SK Hynix plunged 6.1 percent after kicking off a U.S. share sale to raise 43 trillion won ($28.07 billion).

Australian stocks ended slightly lower, dragged down by miners and gold stocks. Banks and technology stocks performed well, helping limit the downside in the broader market.

The benchmark S&P/ASX 200 Index slipped 0.3 percent to 8,803.90, while the broader All Ordinaries Index closed 0.4 percent lower at 9,004.70.

Across the Tasman, New Zealand's benchmark S&P/NZX-50 Index finished marginally lower at 13,762.79 after a choppy session.

Europe

European stocks are mixed on Tuesday as investors pull profits from volatile tech stocks and reports suggested that two commercial vessels were struck by Iranian missiles while transiting the Strait of Hormuz late Monday, reigniting Middle East tensions and pushing oil and bond yields higher.

In economic news, Germany's industrial production grew more than expected in May, data from Destatis revealed earlier today.

Industrial output advanced 0.9 percent on a monthly basis, faster than the 0.2 percent rise in April. A similar faster growth was last seen in September.

On a yearly basis, industrial production remained flat in May after falling 0.9 percent in April.

Elsewhere, U.K. house prices grew for the first time in four months in June, a survey by S&P Global conducted for the Lloyds Bank subsidiary Halifax showed.

House prices increased 0.2 percent a monthly basis in June, offsetting a 0.2 percent fall in May. This marks the first increase in four months and exceeded the forecast of a 0.1 percent rise.

While the German DAX Index is down by 0.5 percent, the French CAC 40 Index is up by 0.3 percent and the U.K.'s FTSE 100 Index is up by 0.6 percent.

Tech stocks traded lower, with Infineon Technologies plunging 5.4 percent and ASML Holding falling 5.1 percent on concerns that the AI-driven rally may have run ahead of itself.

Victrex shares soared 19 percent in London. The specialty polymer maker maintained its full-year guidance after reporting third-quarter revenue growth well ahead of expectations.

Safety equipment maker Halma fell more than 1 percent after it agreed to buy Dreampath Diagnostics, a France-based provider of automated tissue sample management systems for anatomical pathology laboratories.

Energy giant Shell rallied 3 percent after lifting its second-quarter outlook for liquefied natural gas (LNG) volumes.

Geotechnical contractor Keller Group jumped 21 percent to a record high after lifting its full-year guidance.

U.S. Economic News

A report released by the Commerce Department on Tuesday showed a substantial increase in the size of the U.S. trade deficit in the month of May.

The Commerce Department said the trade deficit widened to $77.6 billion in May from a revised $54.6 billion in April.

Economists had expected the trade deficit to surge to $78.7 billion from the $55.9 billion originally reported for the previous month.

The sharply wider trade deficit came as the value of imports shot up by 3.3 percent to $395.3 billion, while the value of exports plunged by 3.2 percent to $317.7 billion.

At 1 pm ET, the Treasury Department is scheduled to announce the results of this month's auction of $58 billion worth of three-year notes.