Finance

The aggressive rally in artificial intelligence stocks faced a significant setback as investors questioned whether future profits can sustain current high valuations. Memory chipmakers like Micron and semiconductor firms such as ON Semiconductor led the downturn, with the latter dropping nearly 24% after announcing a major acquisition. This cooling sentiment was further exacerbated by reports that OpenAI might delay its initial public offering until 2027.

Following the June policy meeting, the Federal Reserve maintained interest rates at 3.50%-3.75% but signaled a potential hike before year-end. New Chair Kevin Warsh oversaw an updated "dot plot" where half of the officials now anticipate tightening policy due to persistent inflation concerns. This pivot has adjusted market expectations away from previously anticipated rate cuts as the 2026 median inflation forecast was revised upward to 3.6%.

Brent crude prices dropped significantly to approximately $72 per barrel, returning to levels seen before recent conflicts involving Iran. The decline followed reports of a provisional peace deal and evidence that oil flow through the Strait of Hormuz is rapidly recovering toward pre-war capacity. Lower energy costs helped boost airline stocks and eased some pro-inflationary risks, contributing to a slight decline in benchmark 10-year Treasury yields.