S&P 500 falls more than 1%, Nasdaq gives up gain as chip stock comeback fizzles

U.S. equities dropped on Tuesday, even as oil prices pulled back, as a surge in chip stocks lost momentum after a one-day rally.

The S&P 500 lost 1.3%, while the Nasdaq Composite fell 2.1%. The Dow Jones Industrial Average traded down 279 points, or 0.6%.

The iShares Semiconductor ETF shed 5% following a 6% rebound on Monday. The ETF had tumbled 10% on Friday for its worst day in six years as investors feared the AI-driven run in chips had risen too far, too fast. Micron Technology dropped more than 6% after Monday’s 10% comeback. The shares tumbled about 20% in two days last week, including a 13% rout on Friday. Broadcom, which had an equally steep two-day drop last week, fell almost 5% as Monday’s rebound fizzled.

“I think everybody’s a little nervous ahead” of the SpaceX IPO, according to Jay Hatfield, CEO of Infrastructure Capital Advisors, noting that Friday’s sell-off may have been related to SpaceX. “I think we’re going to be choppy until we get that behind us.”

Markets had risen earlier as energy prices fell amid hopes for a lasting cessation of hostilities in the Middle East.