PiCK
Wall Street Falls as Mideast Tensions Send Oil Higher, Pressure Chip Stocks
Summary
- Renewed instability in the Middle East sent international oil prices surging and semiconductor shares lower, dragging Wall Street down at the close.
- Reports that Iran's parliament was reviewing legislation to restrict passage through the Strait of Hormuz, along with news of explosion sounds near a tanker, pressured investor sentiment and sent WTI and Brent crude sharply higher.
- A weaker earnings outlook for SanDisk, Western Digital and AppLovin, along with broad weakness in semiconductor stocks including Micron and SK Hynix ADRs, added to the pressure on equities.
Forecast Trend Report by Period
Wall Street closed lower on August 6 as renewed tensions in the Middle East drove oil prices sharply higher and weighed on semiconductor shares.
The Dow Jones Industrial Average fell 0.85% to 53,885.10. The S&P 500 declined 0.18% to 7,709.95, while the Nasdaq Composite slipped 0.06% to 26,348.35.
Investor sentiment weakened after reports that Iran's parliament was reviewing a bill to restrict the passage of US and Israeli vessels through the Strait of Hormuz. Concern spread that tensions around the waterway, a vital route for global crude shipments, could flare up again.
Oil prices surged. West Texas Intermediate futures settled up 2.8% at $77.29 a barrel, and Brent futures rose 3.8% to $82.48 a barrel. Reports of explosion sounds near a tanker passing through the Strait of Hormuz added to the rally.
Separately, reports said Iran and Oman were nearing a temporary agreement to resume vessel traffic through the Strait of Hormuz. Even so, uncertainty remained over whether a deal would be reached and what terms it would include, such as possible transit fees.
A weaker earnings outlook also weighed on stocks. SanDisk fell 6.81% after posting results that topped market estimates but issuing guidance that missed expectations. Western Digital tumbled 13.03%, and AppLovin dropped about 20%.
Semiconductor shares also weakened broadly. Micron Technology fell 1.31%, while SK Hynix ADRs slid 4.97%.
JJ Kinahan, head of retail investing and alternative investments at Cboe, said better-than-expected revenue and net income are no longer enough to lift a stock if its outlook disappoints.
