U.S. stocks took a steep dive on Wednesday as renewed conflict in the Middle East, another wave of semiconductor selling, and anticipation ahead of the Federal Reserve's policy decision weighed heavily on sentiment. The Dow Jones Industrial Average sank more than 800 points, while the S&P 500 and Nasdaq Composite also moved lower as traders reduced risk before several market-moving events.
The sell-off comes at a pivotal moment for Wall Street. Investors are awaiting the Fed's latest interest rate decision and quarterly results from Microsoft and Meta Platforms, both of which are expected to provide crucial insight into whether massive AI investments are beginning to pay off.
Market Movers:
- Manhattan Associates (MANH) +25%: Shares soared after the software company beat quarterly earnings expectations and reaffirmed its full-year outlook. Strong profitability and confidence in continued revenue growth reassured investors despite broader market weakness.
- Teva Pharmaceutical (TEVA) +10%: The drugmaker climbed after reporting stronger-than-expected revenue and raising its outlook for its branded medicines. Growth from Austedo, Ajovy, and Uzedy helped offset softer generic drug sales.
- Ford Motor (F) +8%: Shares gained after the automaker beat earnings expectations and raised its full-year guidance. Improved outlooks for its traditional vehicle business and commercial division helped outweigh one-time losses related to electric vehicles.
- Teradyne (TER) +6%: The semiconductor equipment company advanced after reporting stronger-than-expected earnings and issuing upbeat guidance, citing continued demand for AI-related chip testing equipment.
- Parsons (PSN) -38%: Shares plunged after the engineering contractor lowered its full-year outlook despite posting an earnings beat. Reduced revenue and cash flow guidance overshadowed strong government contract bookings.
- O-I Glass (OI) -19%: The packaging manufacturer tumbled after missing earnings expectations and cutting its full-year forecast due to weak European demand, pricing pressure, and higher energy costs.
- Avis Budget Group (CAR) -12%: Shares fell after quarterly revenue and earnings missed estimates despite improvements in profitability and fleet utilization.
- Skyworks Solutions (SWKS) -6%: The chipmaker declined after issuing a largely in-line outlook, leaving investors looking for stronger near-term growth catalysts despite another quarterly earnings beat.
AI Trade Faces Another Test
Semiconductor stocks remained under pressure after SK Hynix reported record quarterly profit that fell short of Wall Street's expectations. The results renewed concerns that growth across the AI supply chain could begin moderating after several years of extraordinary expansion. Nvidia, AMD, Micron, and other chipmakers moved lower as investors continued questioning whether massive AI infrastructure spending can generate sufficient returns to justify current valuations. The focus now shifts to Microsoft and Meta, whose earnings reports will be closely watched for updates on AI capital spending and monetization.
Middle East Tensions Push Oil Higher
Markets also reacted to renewed military action after Iran launched surprise attacks against U.S. forces, ending a brief pause in hostilities. Oil prices jumped more than 7%, with Brent crude climbing back above $90 per barrel as traders worried about potential disruptions to global energy supplies. Higher oil prices added to inflation concerns ahead of the Federal Reserve's announcement, increasing uncertainty over whether policymakers will keep interest rates unchanged or signal a more hawkish stance for the remainder of the year.
Looking Ahead
Investors now face two major catalysts that could shape markets through the rest of the week. The Federal Reserve's policy announcement will provide fresh guidance on interest rates, while earnings from Microsoft and Meta will offer another test of whether AI spending remains a compelling investment theme. At the same time, developments in the Middle East will remain a key source of volatility. With oil prices rising again and investors already questioning technology valuations, markets could remain highly sensitive to both geopolitical headlines and corporate earnings over the coming days.