• The Nasdaq-100 tumbled 2% intraday, with the Nasdaq Composite closing down 2.38% amid a broad market rout.
  • Surging oil prices and fading hopes for Fed rate cuts fueled the selloff; chip stocks were hit hardest.
  • Investors now eye upcoming economic data for clues on the Fed's next move, as geopolitical tensions simmer.

Nasdaq 100 Extends Decline to 2%

The Nasdaq-100 index extended its decline to 2% on Thursday, as a wave of selling pressure gripped technology stocks. The selloff, which began in the morning session, accelerated throughout the day, with the Nasdaq Composite ending down 2.38% at 21,408.08. The S&P 500 fell 1.74%, while the Dow Jones Industrial Average lost 1.01%. The Philadelphia Semiconductor Index plummeted 4.8%, underscoring the tech-heavy nature of the downturn.

The sharp drop came as investors grappled with a confluence of negative factors. Oil prices spiked, with Brent crude surging 5.7% to $108.01 a barrel, driven by escalating tensions in the Middle East. The conflict, which has disrupted oil shipments through the Strait of Hormuz, has reignited inflation fears and complicated the Federal Reserve's path forward on interest rates.

"The fog of war is thick, and investors are reacting to every headline," said Doug Beath, a strategist at Wells Fargo Investment Institute (WFC). "Until there's clarity, we could see continued volatility."

Tech Giants Under Pressure

Among individual stocks, Nvidia (NVDA) dropped 4.2%, Alphabet (GOOGL) fell 3.4%, and Tesla (TSLA) slid 3.6%. The declines were exacerbated by a series of legal setbacks for major tech firms. Meta Platforms (META) tumbled nearly 8% and Alphabet more than 3% after juries found the companies liable in trials alleging that social media platforms harmed children. Those verdicts added company-specific pressure to an already fragile market.

The broader technology sector has been under scrutiny over the sustainability of massive investments in artificial intelligence infrastructure. Companies like Microsoft (MSFT), Alphabet, and Amazon (AMZN) have poured billions into AI, but investors are increasingly questioning when those outlays will translate into profits.

"The market is differentiating between companies that are funding the AI buildout, those supplying it, and those expected to earn returns from it," said Peter Tuz, president of Chase Investment Counsel. "Weak technical indicators could encourage further selling."

Fed Rate Cut Hopes Diminish

Traders have sharply reduced expectations for Federal Reserve rate cuts this year. According to Reuters (TRI), markets had previously priced in two cuts for 2026, but those bets have evaporated as oil-driven inflation concerns mount. The OECD warned that the conflict has knocked the global economy off a stronger growth path, further clouding the outlook.

"The Fed is in a tough spot," said Thierry Wizman, a strategist at Macquarie (MQG.AX). "An AI-spending slowdown could weaken U.S. growth relative to other developed economies, which would reduce U.S. yields and the dollar. But for now, inflation is the immediate concern."

The yield on the 10-year Treasury note rose to 4.5% as bond prices fell, reflecting expectations of tighter monetary policy. The dollar strengthened against a basket of currencies.

Global Ripples

The selloff was not confined to U.S. markets. South Korea's KOSPI fell 7% overnight, and Taiwan's TSMC (TSM) shares declined despite reporting record profits. Investors rotated toward defensive sectors such as utilities and consumer staples, and Treasuries saw safe-haven buying.

"Strong current earnings don't necessarily prevent a selloff when investors question future returns or financing costs," noted Cecile Mayer-Levi, head of private debt at Tikehau Capital (TKO.PA). "We're seeing a convergence of concerns."

What to Watch

Market participants will be closely watching upcoming economic data, including the personal consumption expenditures (PCE) price index, the Fed's preferred inflation gauge, due on Friday. Any sign that inflation is accelerating could further dampen rate-cut hopes and add to market turbulence.

Additionally, the situation in the Middle East remains fluid. After the close, President Trump announced a 10-day pause in attacks on Iranian energy plants, which helped stock futures pare losses. However, conflicting statements from U.S. and Iranian officials have undermined confidence in a quick resolution.

"The key issue is whether improving share prices are accompanied by stabilizing credit conditions," said Wizman. "For now, that remains uncertain."

As of 4:00 p.m. EDT, the Nasdaq-100 was down 2.1% for the day. The index has now fallen 10.7% from its October 29 closing record, confirming a correction.