Wall Street closed lower Tuesday as a sell-off in major technology stocks, triggered by concerns over potential interest rate hikes, spread from Asian markets to the United States. The S&P 500 dropped 1.4 percent, breaking a streak of 11 weekly gains out of the past 12, largely driven by the tech sector. The Dow Jones Industrial Average, which is less affected by technology shares, ended marginally down 0.1 percent after giving up early gains, while the Nasdaq Composite fell 2.2 percent.

The decline was fueled by steep losses in technology companies heavily associated with artificial intelligence (AI) advancements. In Asia, the effect was pronounced with South Korea’s Kospi index, a notable beneficiary of the AI surge, plunging 10 percent. European markets also experienced declines amid the broader sell-off.

Shares of key tech firms saw significant drops: Micron Technology lost 13.2 percent, Nvidia declined 4.1 percent, and South Korea’s Samsung Electronics fell 12.3 percent. On the other hand, SpaceX, which debuted on the market less than two weeks ago and is pursuing a bond offering to support AI development, closed up modestly by 1 percent after fluctuating early in the session.

Investors’ growing expectations for higher interest rates later this year have cooled enthusiasm for high-flying AI stocks. Rising rates often increase borrowing costs and can constrain both corporate spending and consumer demand, factors that tend to weigh on valuations of growth-oriented companies.

The technology sector’s recent rally has been substantial, contributing to record-setting advances across broader indices through 2026. The S&P 500 technology segment has gained 25.5 percent over the last three months and 16.6 percent year-to-date. Meanwhile, despite Tuesday’s sharp drop, South Korea’s Kospi has nearly doubled so far this year.

Analysts have cautioned that the rapid ascent in tech valuations could lead to a period of correction or consolidation. Brock Weimer, an investment strategy analyst at Edward Jones, described a pullback as “reasonable” following the sector’s accelerated gains.

Amid ongoing inflationary pressures amplified by geopolitical conflicts and tariffs, the Federal Reserve has signaled the possibility of at least one additional interest rate increase before year-end. Wall Street currently places an 85 percent probability on a rate hike this year, up from 60 percent a week prior, according to CME Group data.

Treasury yields eased slightly Tuesday, with the 10-year falling to 4.49 percent and the 2-year to 4.20 percent, remaining elevated due to sustained inflation concerns. Inflation has accelerated in 2026, driven by higher energy prices linked to the U.S.-Iran conflict and related supply chain disruptions. A key inflation report due Thursday is expected to show consumer prices rising 4.1 percent in May, according to forecasts.

Oil prices retreated modestly amid diplomatic negotiations aimed at ending hostilities between the U.S. and Iran. August delivery contracts for U.S. crude fell 0.9 percent to settle at $73.21 per barrel, while September Brent crude declined 0.9 percent to $76.80 per barrel, both levels still notably above pre-conflict prices near $70.