The S&P 500 index, which set a fresh all-time record at 7,428.97 points on Tuesday, retreated back to the 7,350 level by the end of the day. This pullback was driven largely by higher-than-expected U.S. inflation data, surging oil prices, and renewed geopolitical tensions in the Middle East. After a run of successive record highs in recent months, these factors prompted a pause in the rally on Wall Street.
Inflation and oil prices put pressure on markets
Early trading on Tuesday saw the S&P 500 fall around 0.8%, while the Nasdaq Composite dropped nearly 1%. The Dow Jones index, which started the day in positive territory, also ended lower. Technology and semiconductor sectors were hit hardest by the sell-off.
Rising oil prices have fueled heightened inflation concerns among investors. Brent crude approached $108 per barrel amid increased tensions between the U.S. and Iran, disrupting tanker traffic in the Strait of Hormuz and threatening global supply.
Persistent uncertainty in energy markets, coupled with fresh U.S. economic data, resulted in consumer prices coming in higher than anticipated for April. These developments have cast doubt on expectations for U.S. Federal Reserve interest rate cuts later this year.
Sharp sell-offs hit tech stocks
Growth-focused shares have been affected most by these developments. Leading artificial intelligence (AI) and semiconductor companies, which drove gains in early 2026, saw a wave of profit-taking. Intel shares, for example, slid 5% from this year’s highs; Micron Technology fell 4%, while CoreWeave dropped 8% as investors moved away from highly valued AI firms.
The turmoil extended to Asian markets as well. South Korea’s Kospi index fell 2.3% from its recent high as regulators hinted they might target AI-linked profits.
Despite the softer tone across markets, some strategists remain optimistic about the S&P 500. Market analyst Ed Yardeni raised his 2026 year-end target for the index from 7,700 to 8,250 points, citing robust corporate earnings and improving revenue forecasts. Yardeni also suggested the index could surpass 10,000 by 2029, though he warned about high valuations, geopolitical risks, and persistent inflation.
Ed Yardeni argued that strong company balance sheets and ongoing investment in artificial intelligence could drive the stock market higher, despite broader economic uncertainties.
Michael Burry warns of new bubble risks
Investor Michael Burry, known for his warnings ahead of the 2008 housing crisis, made a notable statement about current market conditions. Drawing parallels with the late stages of the dot-com bubble, Burry emphasized the 70% surge in the Philadelphia Semiconductor Index since late March, calling current tech valuations unsustainable.
Burry suggested Wall Street may be overstating profit growth in AI companies by more than 50%. He likened the current environment to “the moment just before a crash scene.”
Michael Burry cautioned that rallies can last longer than expected, advising investors to reduce their weighting in tech stocks and lock in profits.
Market data show that recent gains have become increasingly concentrated in a small group of stocks. Sundial Capital Research noted that on rare occasions when the S&P 500 set new all-time highs, only a minor portion of index members were trading near their 52-week lows—something now observed for only the fourth time ever.
In summary, Wall Street faces a complex outlook. While strong corporate earnings and enthusiasm for AI continue to support the market, rising energy costs, stubborn inflation, and geopolitical risks present significant headwinds to further gains.
