U.S. stocks slip 0.5% as oil impasse offsets AI rally

The S&P 500 fell 0.52% to 7,745.06 as an impasse in Middle East peace talks over the Strait of Hormuz offset a surge in AI-related shares. The Dow Jones Industrial Average lost 272.63 points, or 0.51%, to 53,459.78, while the Nasdaq Composite declined 84.25 points, or 0.32%, to 26,644.91.

"As the rhetoric heats up, so do the prices," said Phil Flynn, senior analyst at Price Futures Group, after Brent crude rose 2.7% to $90.87 a barrel as the U.S. and Iran vied for control of the Strait of Hormuz.

Chip and memory stocks led gains, with Sandisk jumping 8.9%, Marvell rising 5.5% and Micron climbing 4.1%, after a late-Friday report that Anthropic's second-quarter revenue grew 14-fold, a sign of surging AI demand. The PHLX Semiconductor Index rose 1.6%. SpaceX shares gained 4.4% after filings revealed Nvidia owned close to 123 million shares and Alphabet's Google held a 7.2% stake, with Harvard University's endowment disclosing a $2.2 billion position. Breadth was negative, with 864 advancing issues and 1,888 declining on the NYSE.

The gains in AI names were not enough to lift major indexes as broader concerns about economic momentum weighed. China's retail sales rose just 0.6% in July from a year earlier, missing the 1.4% consensus and slowing sharply from June, adding to a picture of softening demand in the world's second-largest economy. Japanese 10-year government bond yields climbed to 2.930%, the highest since 1996, as investors priced in nearly an 80% chance the Bank of Japan raises rates in September.

Yields Rise as Debt Concerns Persist

U.S. Treasury yields rose as investors sold long-dated government debt on concerns about the federal debt load and the Middle East conflict. The 10-year yield gained 0.029 percentage point to 4.725%, while the ICE dollar index fell 0.09 percentage point and the euro traded at $1.16. Gold rose $37.40 to $4,417.80 per troy ounce.

S&P 500 companies' revenues grew 6.4% in the second quarter from a year earlier, the fastest pace in five years, Goldman Sachs said, excluding the energy sector. Overall earnings grew nearly 50%, though much of that reflected large technology companies marking up the value of stakes in private AI companies. Tariff refunds have exceeded $100 billion, with companies treating the proceeds as a one-time windfall to increase marketing budgets and offset costs.

Retail Earnings and Fed Minutes in Focus

Investors now look to a busy week of retail earnings and the release of minutes from the Federal Reserve's July meeting. Home Depot reports Tuesday, Target, Lowe's and TJX report Wednesday alongside the Fed minutes, and Walmart and Alibaba report Thursday. The combination of elevated oil prices, weak Chinese demand and rising Japanese yields leaves the market vulnerable to fresh inflation shocks even as AI-related strength provides sector-specific support.

This article is for informational purposes only and does not constitute investment advice.