US equities mixed as oil prices slump and AI sector faces renewed scrutiny
Oil prices plunged as Strait of Hormuz navigation resumes, while artificial intelligence-linked stocks faced selling pressure over valuation concerns. JPMorgan upgraded its year-end S&P 500 forecast to 7,800, citing strong corporate performance.
US equity markets displayed mixed performance on Wednesday, with the Dow Jones Industrial Average rising 0.2% while the S&P 500 and Nasdaq Composite slipped 0.2% and 0.4% respectively. The market rebounded from Tuesday’s tech-heavy losses, though selling pressure resumed in artificial intelligence-linked stocks due to concerns over valuations and interest rates. Oil prices plunged, with Brent crude falling 4% to $73 a barrel and West Texas Intermediate dropping to $70 a barrel, as oil tankers resumed navigating the Strait of Hormuz following a US-Iran memorandum of understanding. President Trump cancelled the signing of housing legislation until Congress passes a voter ID bill. Meanwhile, JPMorgan raised its S&P 500 year-end target to 7,800, citing resilient earnings and AI growth.
The divergence in market performance highlighted a rotation away from high-growth technology names. The Nasdaq Composite and S&P 500 retreated from session highs, weighed down by semiconductor and memory stocks. Shares of Palantir, Arm Holdings, SanDisk, Seagate, and Western Digital were among the biggest laggards as concerns about artificial intelligence spending and higher borrowing costs resurfaced. Nvidia saw orderly selling throughout the afternoon, closing down about 1%, while Micron shares slipped more than 1% ahead of its earnings report due after the bell.
In the energy sector, the geopolitical landscape shifted significantly following the US-Iran memorandum of understanding. Brent crude futures tumbled 4% to $73 a barrel, and West Texas Intermediate crude futures dropped to $70 a barrel as oil tankers began navigating the Strait of Hormuz again. Despite the drop, uncertainty persists regarding transit fees, with Iran and Oman discussing a system to charge ships for transiting the key waterway. The International Energy Agency now expects a surplus of oil in the market in 2027, prompting major banks like Goldman Sachs to lower their price targets for the coming quarters.
Political developments added another layer of complexity to the trading day. President Trump cancelled the signing of the 21st Century ROAD to Housing Act, stating he would not sign the bill until Congress passes the SAVE America Act, a voter identification bill. The suspension leaves the first major piece of housing legislation to reach the president’s desk since the financial crisis in limbo, denying congressional Republicans a key affordability-related win ahead of the November midterms.
Despite the volatility, institutional optimism remains strong. JPMorgan raised its year-end price target for the S&P 500 to 7,800 from 7,600, citing resilient corporate earnings and the continued strength of the AI trade. Dubravko Lakos-Bujas, JPMorgan’s global head of market strategy, noted that consensus earnings growth has been revised higher to around 20% on average for the next two years. The bank’s upgrade reflects a view that the market is approaching a 'Blue Sky' scenario, supported by the slowdown in the Iran conflict and robust earnings performance.
