Sinking AI stocks and another climb in oil prices because of the Iran war helped pull Wall Street off its record heights on Tuesday.
The S&P 500 fell 0.5% from its latest all-time high. The Dow Jones Industrial Average dropped 25 points, or 0.1%, while the Nasdaq composite fell 0.9% from its own record.
Stocks in the artificial-intelligence industry led the way lower.
The weakness came after a report in The Wall Street Journal said some leaders at OpenAI were concerned about whether it could support its massive spending on data centres after missing targets for new users and revenue. If the maker of ChatGPT pulls back on its investments, it could bolster criticism that the entire AI industry is in a bubble of over-the-top spending that may not produce the profits and productivity that would make it all worth it.
The drops came just a day before several of the biggest spenders on AI are scheduled to report their latest results for the start of 2026. They could offer more clues on whether all the investment in AI is producing the kind of returns that shareholders care about.
Alphabet, Amazon, Meta Platforms and Microsoft are all reporting their latest quarterly results on Wednesday.
New oil price rise
Also weighing on the stockmarket was another rise for oil prices on continued uncertainty about what will happen with the Iran war.
The price for a barrel of Brent crude oil to be delivered in June climbed 2.8% to settle at $US111.26. Brent to be delivered in July, which is where more of the trading is happening in the oil market, rose 2.7% to $US104.40.
After sitting around $US70 in late February, Brent prices are moving closer to their peak of $US119 reached when worries about the war have been at their heights.
The focus is on the Strait of Hormuz, whose effective closure is keeping oil tankers stuck in the Persian Gulf instead of heading to customers worldwide. The Trump administration seemed unlikely Tuesday to accept Iran's offer to reopen the Strait of Hormuz if the US lifts its blockade on the country.
The proposal would postpone discussions on the Islamic Republic's nuclear program, something that US Secretary of State Marco Rubio appeared to rule out in an interview on Monday.
Meanwhile, the average price for a gallon of gasoline in the United States reached $US4.18 on Tuesday, the most since 2022, according to the auto club AAA.
All told, the S&P 500 fell 35.11 points to 7,138.80. The Dow Jones Industrial Average dropped 25.86 to 49,141.93, and the Nasdaq composite sank 223.30 to 24,663.80.
Fed’s latest decision on rates
In the bond market, US Treasury bond yields held relatively steady after a report showed US 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 on Monday.
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 at a time when oil is expensive and tariffs are threatening to push prices higher.
Also on Wednesday, the US Senate Banking Committee will vote on whether to confirm President Donald Trump's nominee, Kevin Warsh, to succeed Fed Chair Jerome Powell. The committee is expected to approve Warsh and send his nomination to the full Senate.
In stock markets abroad, indexes fell across much of Europe and Asia.
Japan's Nikkei 225 sank 1% for one of the world's larger losses after the Bank of Japan opted in a split vote to keep its key interest rate unchanged.
"There are various risks to the outlook," it said in a statement. "For the time being it is necessary to pay particular attention to the impact of the future course of the situation in the Middle East."
