Slumping chip makers. Renewed fighting in the Middle East. Inflation and the prospect of interest-rate hikes.

A confluence of pressures have hit stocks in recent weeks, and Thursday's moves extended a spate of volatility. The Nasdaq composite fell 1.5%, leading the session's losses. The S&P 500 fell 0.5% and the Dow Jones Industrial Average slipped 0.2%, or 105.67 points.

Despite the swings, stocks remain near records, with the S&P 500 closing around 1% from an all-time high reached in June.

Here is a look at what is going on underneath the surface:

A selloff in chip makers

Another quarter of solid earnings from Taiwan Semiconductor Manufacturing did little to mitigate a rough patch for chip stocks, with investors worried more about its spending plans than its bright outlook. Shares of chip makers from Santa Clara, Calif., to Seoul slid.

That extended declines from the previous session. The stratospheric gains in chip stocks had helped power recent records, and now their retreat has some investors shifting money to sectors like healthcare or financials.

Shares of Sandisk fell 13%, Western Digital declined more than 9% and Marvell Technology lost 8.7%. The PHLX Semiconductor index slid 4.3%.

Rising oil prices

Renewed hostilities between Washington and Tehran have sent oil prices climbing again.

Brent crude futures, the international benchmark, have climbed roughly 16% to $84.23 a barrel so far in July. Crude prices had fallen in recent weeks, with investors believing that the end of fighting was in sight, alleviating some worries about war-fueled inflation. And prices remain well below their March highs above $118 a barrel.

But some analysts said the relief that followed this week's unexpectedly cool reading of the consumer-price index could evaporate quickly if energy prices keep climbing.

Teetering Treasury yields

The resumption of hostilities has helped drive the yield on the benchmark 10-year Treasury note -- which helps set borrowing costs on everything from mortgages to student loans -- back near its highest levels of the year around 4.7%.

But yields retreated after Tuesday's CPI report, and a separate report showing a surprising decline in producer prices. Investors have been concerned that persistent inflation will lead the Federal Reserve to raise interest rates this year.

The yield on the 2-year U.S. Treasury note, which is particularly sensitive to the outlook for short-term rates set by the Fed, settled at 4.155% on Thursday -- far higher than their prewar lows around 3.4%, but still down from this year's highs above 4.2% reached earlier this month.

Strong earnings

Strong earnings this year have helped drive this year's stock rally. But solid results haven't been enough to prevent companies from tech giants to major banks from suffering stomach-churning drops in their shares.

A surge in profits helped send lenders including Goldman Sachs and Morgan Stanley to records this week, along with the KBW Nasdaq Bank Index. But on Thursday, Goldman Sachs fell 4.9%, Morgan Stanley lost more than 4% and JPMorgan Chase slipped 1.1%.

Companies that haven't met Wall Street's expectations have dealt with worse: Shares of IBM fell more than 25% Tuesday, their largest one-day drop on record, after the company issued a rare profit warning.

Broadening rally

Many analysts expect the stock rally to keep broadening beyond just big tech during the second half of the year. Just a few weeks in, it is becoming clear investors are looking beyond hyperscalers and chip makers.

One area benefiting from that search: Shares of the railroads, airlines and trucks moving the goods and supplies powering the economy. The Dow Jones Transportation Average, which tracks 20 large companies, rose 3.2% on Thursday and is up 5% in July. That group of stocks, seen as a barometer for the economy's health, recently notched its best start to the year since 1991.

Healthcare is another area posting gains, with the S&P 500 sector rising 6.2% over the past month, making it the best-performing of the broad index's 11 groups.

Write to Krystal Hur at krystal.hur@wsj.com

(END) Dow Jones Newswires

July 16, 2026 17:41 ET (21:41 GMT)

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