SPY, QQQ, DIA Slip As Inflation Concerns Hinder AI Rally

• Markets were weighed down by a dip in technology megacap stocks. 
• The S&P500 and the Nasdaq indices fell 0.2% and 0.7% respectively, while the Dow Jones rose 0.1%
• Hot inflation numbers above the U.S. Fed target raised concerns. 

The S&P 500 slipped from record highs on Tuesday along with the Nasdaq index as red-hot inflation data on the back of soaring fuel prices overshadowed general AI optimism and tech stock strength, while the Dow Jones index eked out minor gains. 

The tech-heavy Nasdaq was down 0.7%, the S&P 500 was down 0.2%, while the Dow gained 56 points, or 0.1%. 

Bureau of Labor Statistics data released on Tuesday highlighted the conflict in Iran is fueling a resurgence in inflation, placing additional pressure on consumers who were already reeling under the pressure of rising living costs and poor wage growth. 

After adjusting for the rise in inflation, real wages saw a year-over-year decline in April, marking the first such contraction since 2023, according to data from Bureau of Labor Statistics. 

The U.S.-Iran war has had spill over effects across multiple sectors. The consumer price index for April rose 3.8% from a year ago, the most since 2023, data out Tuesday showed. The war pushed gas prices up by 50% since the war began, according to data from the American Automobile Association, and the latest Bureau of Labor Statistics report pointed to rising prices for airfares, housing, clothing and food. 

Megacap tech stocks dropped the most, pulling the Nasdaq down nearly 1%, on Tuesday. Advanced Micro Devices (AMD) and Qualcomm (QCOM) dropped 2% and 11%, respectively. In April, AMD had surged more than 74%, while Qualcomm gained more than 39%.

The PHLX Semiconductor Sector Index (SOX) , which is a strong barometer for performance of chipmaker stocks, fell 3% today.   

“I think for equity investors, the main takeaway here is that higher energy prices are eroding consumers’ purchasing power,” wrote Neil Dutta of Renaissance Macro Research (RenMac) in a note accessed by Barron’s. 

Trending Stocks To Watch 

Oklo (OKLO): Stock is trending as investors react to the NRC's approval of the Principal Design Criteria for its Aurora powerhouse, a major regulatory milestone that de-risks the path. 

Micron Technology (MU): The stock reversed gains to drop nearly 4% after its gains pushed the S&P500 and Nasdaq to record highs on Monday as investors pulled out of some technology stocks given the recent rally. 

Wendy’s (WEN): The stock surged 17% on Tuesday amid reports that Nelson Peltz's Trian Fund Management is actively seeking financing to take the company private.  

Plug Power (PLUG): Plug stock soared to its seven-month high after it reported a 22% jump in Q1 revenue to $163.5 million, topping Wall Street expectations of $139.76 million.

Nvidia (NVDA): The stock was the only major AI and megacap technology company to gain on Tuesday after several brokerages raised share price targets ahead of its first-quarter earnings next week. 

Other tickers trending on Stocktwits at the time of writing included SLS, MRAM, RCAT, WOK, RST and BABA. 

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