Wall Street's major indexes finished mixed on Tuesday (Wednesday AEST) as a renewed sell-off in technology stocks weighed on the broader market, while escalating tensions in the Middle East added to investor caution.
The Dow Jones Industrial Average rose 86.1 points, or 0.2%, to 50,872.1. However, the S&P 500 fell 19.1 points, or 0.3%, to 7,386.7, while the Nasdaq Composite dropped 250.8 points, or 1%, to close at 25,678.8.
Investor sentiment deteriorated after President Donald Trump said the United States would respond after Iran reportedly shot down a U.S. Apache helicopter patrolling the Strait of Hormuz overnight.
The comments raised fresh concerns about the prospects for a ceasefire in the Middle East conflict and heightened geopolitical uncertainty.
Market volatility increased throughout the session, with the Cboe Volatility Index climbing to its highest level since 7 April as equities came under pressure.
Technology shares led declines after briefly recovering in the previous session. The technology sector ended down 1.8%, while the semiconductor index lost 1.9%.
Investors were also positioning ahead of several key events later this week, including the release of May consumer price inflation (CPI) data and the highly anticipated initial public offering of SpaceX.
The inflation report, due on Wednesday, is expected to provide further insight into whether higher energy prices linked to the conflict in the Middle East are feeding into broader price pressures across the economy.
Recent economic data has reinforced expectations that the Federal Reserve may need to tighten monetary policy further. A stronger-than-expected U.S. employment report released on Friday increased market bets that interest rates could rise again before year-end.
Attention is also turning to SpaceX's planned market debut on Friday. The Elon Musk-led company is seeking to raise US$75 billion and is targeting a valuation of $1.75 trillion, which would make it the largest IPO on record.
Technology and artificial intelligence-related stocks have faced mounting pressure since Friday after Broadcom issued a disappointing outlook, prompting investors to reassess valuations across the sector.
Despite recent weakness, the semiconductor index remains up 78.7% for the year.
Broadcom shares fell 1.1%, while NVIDIA slipped 0.2%.
On the bond markets, Treasury yields eased modestly. The yield on the 10-year Treasury note declined 1.1% to 4.518%, while the two-year Treasury yield also fell 1.1% to 4.122%.
