New York Stock Market Faces AI Rally Setback: Where Are the Real Danger Signals Coming From?

On the 18th local U.S. time, New York markets fell for the third consecutive day. The S&P 500 closed at 7,691.76, down 0.7%; the Dow slipped 0.2% to 53,343.40; and the Nasdaq fell 1.3% to 26,289.71. While the pullback from recent highs was modest, AI-related stocks that had led the rally, along with interest rates and oil prices, simultaneously weighed on investor sentiment.

The biggest shock to the market came from a sharp drop in AI semiconductor stocks. Micron fell 7%, while Nvidia and Broadcom declined 2.3% and 3.2%, respectively. Although demand for AI remains strong, investors were reminded that in a high-rate environment—amid concerns of overvaluation—expensive growth stocks face increased downward pressure.

In the bond market, the yield on the 10-year U.S. Treasury remained elevated at 4.70%, and the 30-year yield hovered near its highest level since 2007. Meanwhile, amid fallout from the war in Iran, Brent crude rose to $91.02 per barrel, stoking concerns of renewed inflation. High oil prices and Treasury yields make it harder for the Fed to pivot to easing and reinforce expectations of prolonged rates, putting pressure on overall equity valuations.

Real-economy indicators also raised concerns. U.S. housing starts in July dropped 12.4% month-on-month, undershooting market forecasts. While the slowdown in the housing sector was confirmed, the data also sent a mixed signal—suggesting that economic concerns are severe enough to push rates down. Amid this environment, Home Depot saw its stock fall just 0.1%, despite beating quarterly sales and earnings estimates, reflecting lingering worries about a housing downturn. This underscores how the Fed’s policy options are narrowing between growth and inflation.

In summary, this correction resembles a complex risk convergence of “AI overvaluation + Middle East–driven oil spike + economic slowdown signals” rather than a simple market pullback. While short-term volatility may persist, investors should separately assess the staying power of the AI theme, earnings resilience in a high-rate environment, and the risk of renewed inflation from prolonged Middle East tensions.