S&P 500 falls 0.5% from record amid sinking AI stocks and Brent crude at $111 amid Iran tensions; Fed holds rates steady, eyes Warsh nomination; JetBlue, Coke gain despite fuel woes.
Sinking AI stocks and another climb in oil prices because of the Iran war helped pull Wall Street off its record heights on TuesdayThe S&P 500 fell 0.5% from its latest all-time high. The Dow Jones Industrial Average dropped 25 points (0.1%) while the Nasdaq composite fell 0.9% from its own record.
The price for a barrel of Brent crude oil to be delivered in June climbed 2.8% to settle at $111.26. Brent to be delivered in July, which is where more of the trading is happening in the oil market, rose 2.7% to $104.40.
OpenAI shares weakened after a Wall Street Journal report revealed leaders' concerns over supporting massive data center spending amid missed user and revenue targets. Any pullback could fuel criticism that the AI industry's over-the-top investments form a bubble, unlikely to yield promised profits or productivity. This comes a day before major AI spenders report Q1 2026 results, offering clues on shareholder returns.
Tensions in the Strait of Hormuz have trapped oil tankers in the Persian Gulf, with Iran offering to reopen it if the U.S. lifts its blockadethough the Trump administration, via Secretary Marco Rubio, rejected this amid nuclear talks. U.S. gasoline hit $4.18 per gallon Tuesday, the highest since 2022 per AAA, contributing to JetBlue Airways' worse-than-expected Q1 loss.
On Wednesday, the Federal Reserve is set to announce its latest decision on short-term interest rates. The widespread expectation is that it will hold the federal funds rate steady and hold off on resuming its cuts. Lower interest rates would help the economy, but they also risk worsening inflation when oil is expensive and tariffs are threatening to push prices higher. Also Wednesday, the Senate Banking Committee will vote on whether to confirm President Donald Trumps nominee, Kevin Warsh, to succeed Fed Chair Jerome Powell. The committee is expected to approve Warsh and send his nomination to the full Senate.
JetBlue Airways nevertheless rose 1.2% after CEO Joanna Geraghty said the airline saw demand from customers strengthening through the quarter. JetBlue also announced moves to rein in fuel costs, such as cutting some flying. Coca-Cola rallied 3.9% after reporting stronger profit and revenue for the latest quarter than analysts expected, thanks in part to strength from China, the United States and India.
In the bond market, Treasury yields held relatively steady after a report showed U.S. consumers are feeling slightly more confident in April, when economists expected to see a decline. The yield on the 10-year Treasury remained at 4.35%, where it was late Monday.