S&P 500 Awaits Micron as AI Chip Trade Wobbles

Summary

The S&P 500 remains focused on the semiconductor sector after signs emerged that the crowded AI-chip trade is losing momentum, with South Korea’s retail-driven technology rally showing signs of fatigue and TSMC coming under pressure. Investors are closely watching whether major chip customers continue committing capital to long-term supply agreements amid stretched positioning across the sector. The US dollar remained firm against major currencies, while the yen stayed weak as markets weighed the possibility of coordinated support measures. Indonesia’s market also remained in focus after MSCI delayed any change to its market classification status.

Equities

The FTSE 100 closed 0.1% lower on Tuesday, briefly touching its weakest level since 12 June, while the FTSE 250 fell 1.2% to its lowest level since 11 June. Mining stocks weighed on the market as commodity prices weakened, with precious metals and industrial metals sectors both falling around 4%.

In company news, shares in Bunzl closed 5.6% higher on Tuesday after the business raised its full-year revenue growth outlook. Management pointed to strong first-half trading, supported by robust demand in North America and selective price increases. By contrast, Telecom Plus plunged 25.7% after unveiling a five-year investment programme that is expected to reduce near-term profits as the company responds to stronger competition in the UK energy market.

Political developments also remained in focus following the resignation of Keir Starmer. Investors continued to assess the likely economic approach of leading contender Andy Burnham, particularly given the pressure on public finances and elevated government debt levels.

On Wall Street, the S&P 500 closed 1.44% lower on Tuesday at a one-week low, while the Nasdaq Composite dropped 2.21%. The Dow Jones Industrial Average edged down 0.09%. Technology shares led the decline, with the semiconductor sector coming under significant pressure. The Philadelphia Semiconductor Index fell 7.9%, while the S&P 500 information technology sector lost 3.7%.

Nvidia closed 4.1% lower on Tuesday, while Alphabet fell 1.0%. Chipmakers suffered steeper declines, with Intel, Marvell Technology and Advanced Micro Devices ending between 5.8% and 9.4% lower.

Memory-chip producers were hit particularly hard. Micron Technology and SanDisk both closed around 13% lower on Tuesday ahead of Micron’s earnings announcement due on Wednesday, which investors will watch closely for indications on demand across memory and artificial intelligence markets.

Meanwhile, SpaceX rose 1.0% on Tuesday after recent weakness. The company has joined a growing list of large corporations raising debt to fund investment, following its recent entry into public markets. The CBOE Volatility Index climbed to 19.52, its highest level in more than a week, as investors adjusted expectations for US interest rates ahead of key inflation data due later this week.

Forex & Commodities

The US dollar rose early on Wednesday, reaching a 13-month high against a basket of major currencies as demand strengthened during a sharp sell-off in technology stocks. The dollar index climbed to 101.5, its strongest level since May 2025.

Sterling edged lower to $1.319 after Bank of England policymaker Alan Taylor said an “extended hold” on interest rates was the right response to inflation pressures. The euro traded near a one-year low at $1.136, while the yen weakened to 161.6 against the dollar despite fresh intervention warnings from Japanese officials.

The Australian dollar held at $0.6918 early on Wednesday, near an 11-week low, after mixed inflation data made the outlook for interest rates less clear. The New Zealand dollar fell to $0.5654, a fresh seven-month low.

Gold fell early on Wednesday, with spot prices down 0.5% at $4,089 an ounce after touching the lowest level since 11 June. Investors are now watching US Personal Consumption Expenditures data due on Thursday, the Federal Reserve’s preferred inflation measure.

Markets are pricing in a 36% chance of a US rate rise in July, up from 8.5% a week earlier, while the chance of a September rise has moved above 70%. Some Bank of Japan board members also called for further rate rises after the central bank’s June meeting.

Oil extended its decline on Wednesday. Brent crude fell 0.9% to $76.36 a barrel, while US crude slipped 0.8% to $72.60, as more tankers moved through the Strait of Hormuz.