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Wall Street indexes drop 1% due to tech and Iran War worries

Investors are uncertain as the major U.S. indexes closed more than 1% down on Wednesday. Chipmaker shares have continued to decline and renewed tensions between?the U.S.

After one of the largest exchanges of gunfire overnight in the Middle East War since April, President Donald Trump announced that the U.S. will attack Iran "very hard".

Nvidia, Broadcom and other semiconductor companies were the main drags on the S&P 500. Investors are concerned about the stretched valuations in the semiconductor sector.

The Cboe Volatility Index has advanced for the second consecutive day. In recent days, volatility has increased.

Tom Hainlin is an investment strategist with U.S. Bank Wealth Management, based in Minneapolis.

He said that investors were also "pricing in maybe a higher rate of interest" following recent economic data, and they are worried about the war.

He said, "Perhaps this conflict will continue into the late summer or mid-summer."

At its policy meeting in June, the Federal Reserve is expected to keep interest rates unchanged. Investors have priced in at least a 25 basis-point rate increase by the end the year.

The S&P 500 fell 119.00 points or 1.61% to 7,267.65, while the Nasdaq Composite dropped 505.31 or 1.97% to 25,169.50. The Dow Jones Industrial Average dropped 952.04 points or 1.87% to 49,920.07.

The U.S. employment report on Friday was better than expected. Data showed that on Wednesday, U.S. Consumer prices rose 4.2% over the past 12 months, which is the highest increase since April 2023. The Middle East conflict has also increased the price of energy products and gasoline.

According to a survey of economists, the pace of growth was in line with predictions.

Super Micro Computer, among other decliners fell after it announced plans to raise $7 billion via a series equity and equity-linked finance transactions in order to fund component purchases needed for its growing AI servers demand.

Healthcare, real estate, and consumer staples have all benefited from the rotation of shares in high-flying technology companies.

SpaceX's much-hyped listing on Friday of $1.75 trillion, which aims to raise a record $75 Billion, could also put pressure on U.S. stock prices as fears mount over excessive optimism in tech.

Shares of XPO, J.B. 'Hunt, and Old Dominion, among others, also fell after Amazon announced its expansion of less-than truckload freight services in America. The industrials sector led the declines. Caroline Valetkevitch reported from New York, Joel Jose from Bengaluru and Twesha Dkshit in Bengaluru. Additional reporting was provided by Twesha Dkshit and Sruthi Shankar in Bengaluru. Shinjini Gregorio and David Gregorio edited the article.

(source: Reuters)