Wall Street closed lower Tuesday as renewed concerns that advanced AI could disrupt established software companies weighed on technology shares, while escalating Middle East tensions pushed oil higher and investors positioned for next week’s Federal Reserve decision.
By yourNEWS Media Newsroom.
U.S. stocks fell Tuesday as a fresh wave of concern over artificial intelligence pressured major software companies, while rising oil prices and uncertainty over next week’s Federal Reserve interest-rate decision added to investor caution.
The S&P 500 dropped 44.66 points, or 0.58%, to 7,673.94, according to preliminary closing data. The Nasdaq Composite declined 83.30 points, or 0.31%, to 26,423.69, while the Dow Jones Industrial Average fell 617.15 points, or 1.16%, to 52,797.10.
Software stocks were among the session’s weakest performers, with Salesforce, ServiceNow and Intuit all declining. OpenAI’s launch last week of its newest model, GPT-6 Astra, revived investor concerns that increasingly capable artificial intelligence could compete directly with products and services offered by specialized software companies.
The S&P 500 software and services index declined for a second consecutive session.
“Astra has kind of reignited the software disruption fears and it’s resumed that old trend that we got used to for a while, where semiconductor stocks and data center capex beneficiaries do well, while software stocks do poorly,” said Jed Ellerbroek, portfolio manager at Argent Capital Management.
The divide was evident elsewhere in the technology sector. Intel jumped and Qualcomm also gained after the companies reached an agreement with Amazon to develop custom artificial intelligence chips, reinforcing investor interest in semiconductor companies and businesses positioned to benefit from growing AI infrastructure spending.
Apple declined one day before an event at which the company is expected to unveil its latest smartphone under new CEO John Ternus.
Investors were also preparing for inflation reports that could influence the Federal Reserve’s Sept. 15-16 policy meeting.
Expectations for another increase in interest rates rose after Labor Department data released last week showed employers added significantly more jobs than economists had anticipated in August.
Traders now assign a 60% probability to a rate increase at next week’s meeting, according to the CME FedWatch tool.
Producer and consumer inflation reports due this week are expected to receive particular attention as policymakers assess whether price pressures are continuing to ease sufficiently to avoid additional monetary tightening.
Higher Treasury yields have already created another headwind for equities. Rising returns on relatively low-risk U.S. government debt can make stocks less attractive by increasing the return investors can obtain without assuming comparable market risk.
Despite Tuesday’s decline, the S&P 500 remains up approximately 12% in 2026 and sits roughly 1% below its record closing high reached Aug. 13.
The benchmark is trading at approximately 19 times expected earnings, down from about 21 times in early June, according to LSEG data. The lower valuation multiple has occurred even as analysts raised earnings expectations following a strong second-quarter corporate reporting season.
Geopolitical tensions, however, remain a significant source of uncertainty.
Oil climbed to a six-week high Tuesday after Iran-backed Houthi forces in Yemen attacked Saudi energy facilities, setting oil installations on fire and raising concerns that the six-month-old Middle East conflict could further disrupt regional energy production and transportation.
Shipping through the Strait of Hormuz also slowed, while Iran warned Monday that it would retaliate against any additional U.S. attacks.
“The conflict between the United States and Iran is beginning to look less like a temporary disruption and more like a longer-term backdrop for markets,” said Jeff DerGurahian, chief investment officer at loanDepot.
Energy shares benefited from the rise in crude prices. The S&P 500 energy index advanced, with Marathon Petroleum and Occidental Petroleum among the companies gaining ground.
The combination of higher oil prices and the possibility of tighter monetary policy creates a complicated outlook for investors because elevated energy costs can add to inflation at the same time the Federal Reserve is evaluating whether interest rates need to rise further.
Cryptocurrency-linked stocks also weakened Tuesday as bitcoin pulled back from the $80,000 level. Coinbase and Strategy both declined.
The session ultimately reflected several competing forces across markets: stronger expectations for corporate earnings, renewed fears that AI could disrupt established software businesses, higher Treasury yields, uncertainty over Federal Reserve policy and an increasingly prolonged Middle East conflict that is putting additional pressure on global energy markets.
With key inflation reports still ahead and the Fed scheduled to meet next week, investors are now looking for evidence on whether the U.S. economy can sustain strong growth without generating the inflation pressures that could prompt another rate increase.
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