United States benchmark averages retreated from record levels on Thursday (Friday AEST), as a sharp sell-off in software stocks and a surge in oil prices weighed on investor sentiment amid ongoing uncertainty surrounding the Iran conflict.
The Dow Jones Industrial Average fell 179.7 points, or 0.4%, to 49,310.3. The S&P 500 declined 29.5 points, or 0.4%, to 7,108.4, while the Nasdaq Composite underperformed, dropping 219.1 points, or 0.9%, to 24,438.5.
Losses were led by the technology sector, particularly software, after disappointing corporate updates reignited concerns over growth prospects and the disruptive impact of artificial intelligence on traditional business models.
Shares of IBM and ServiceNow tumbled 8.3% and nearly 17.8%, respectively, following their latest quarterly results.
While IBM exceeded expectations on both revenue and earnings, its decision to maintain full-year guidance failed to reassure investors.
ServiceNow, meanwhile, cited slower subscription revenue growth, attributing part of the weakness to disruption stemming from the Middle East conflict.
Major technology names followed suit, with Microsoft falling 4%. Palantir Technologies dropped 7.2%, and Oracle declined 6%.
Geopolitical developments added to market unease. President Donald Trump on Thursday ordered the Navy to “shoot and kill any boat” laying mines along the strait. “There is to be no hesitation”, the president wrote in a Truth Social post.
Oil prices surged later in the session, with Brent crude futures settling 3.1% higher at US$105.07 per barrel.
The move followed reports that Iran’s parliament speaker had resigned from the negotiating team, fuelling speculation that the Revolutionary Guard could be asserting greater control.
Tensions were further heightened by reports that air defences in Tehran were “engaging hostile targets”, according to Reuters, citing Iran’s Mehr news agency.
Outside of technology, Tesla shares fell 3.6% after the company increased its annual spending plan to more than US$25 billion, raising concerns about capital intensity and near-term profitability.
In contrast, Texas Instruments surged 19.4%, marking its largest daily gain since October 2000, after issuing a stronger-than-expected forecast for second-quarter revenue and profit.
Elsewhere, volatility was evident in the consumer sector, with Avis Budget shares plunging 48.4%, recording their steepest two-day decline on record following a sharp rally reminiscent of the meme-stock surge.
On the macroeconomic front, data showed that weekly initial jobless claims rose only marginally, suggesting continued resilience in the labour market.
However, concerns remain that rising energy prices linked to geopolitical tensions could weigh on economic activity in the months ahead.
Meanwhile, S&P Global’s flash purchasing managers’ indices (PMI) showed improvement, with manufacturing rising to 54 from 52.3 in the previous month and above expectations of 52.5.
The services index also edged higher to 51.3 from 49.8, exceeding forecasts of 50.
The release noted: "U.S. business activity growth recovered slightly in April having slowed to near-stagnation in March following the outbreak of war in the Middle East.
"However, the overall pace of expansion remained subdued, most notably in the services economy where demand faltered. While manufacturing output showed a solid gain, the increase in part reflected stock building in the face of concerns over supply availability and price hikes.
"Input cost inflation accelerated and supply delays worsened at a pace not seen since mid-2022, contributing to the largest monthly jump in average selling prices for goods and services since July 2022.”
On the bond markets, the yield on the 10-year note rose 0.5% to 4.325%, while the 2-year yield climbed 0.7% to 3.832%.
