Tech Weakness Overshadows Chip Rally as Inflation Keeps Markets on Edge

US equities closed Thursday on a mixed note as renewed strength in semiconductor stocks failed to offset broad-based weakness among large-cap technology companies. Investors continued to weigh persistent inflation pressures, shifting expectations for US interest rates, and renewed geopolitical risks affecting energy markets.

The Dow Jones Industrial Average managed to edge 0.1% higher, although it surrendered most of its intraday gains. The S&P 500 finished little changed after fluctuating between positive and negative territory throughout the session, while the Nasdaq Composite fell 0.5%, extending its losing streak to a fourth consecutive day as heavyweight technology stocks remained under pressure.

Semiconductor stocks provided one of the session's brightest spots following stronger-than-expected quarterly results from Micron Technology. The memory chip maker surged approximately 15% after reporting earnings and revenue well above Wall Street forecasts, supported by robust demand for AI and data centre memory products. The company also highlighted a dramatic improvement in profitability, with gross margins approaching 85%, up from less than 40% a year earlier, reflecting ongoing supply shortages across the memory market.

The optimism spread across the sector, with SanDisk soaring 22% and Western Digital advancing roughly 5%, helping to restore confidence after recent weakness among memory stocks.

However, those gains were outweighed by heavy selling in the broader technology sector. Apple dropped 6% after announcing higher prices for its Mac and iPad product lines, fuelling concerns that rising component costs may begin eroding consumer demand. Nvidia also reversed early gains to close around 2% lower, while Broadcom lost approximately 1%. SpaceX shares slipped another 1%, marking their weakest closing level since the company's stock market debut.

Investors also digested fresh inflation data that reinforced expectations that US monetary policy may remain restrictive for longer. The Personal Consumption Expenditures (PCE) Price Index, the Federal Reserve's preferred inflation measure, rose 0.4% in May, lifting the annual inflation rate to 4.1%, still well above the central bank's 2% target. Core PCE, which excludes food and energy prices, increased 0.3% on the month and 3.4% year over year.

The figures reinforced recent comments from Federal Reserve officials indicating that further interest rate increases remain possible should inflation fail to moderate sufficiently.

Despite the inflation surprise, US Treasury markets remained relatively calm. The yield on the benchmark 10-year Treasury note eased slightly to 4.40% from 4.42%, suggesting investors viewed the data as broadly in line with expectations rather than materially altering the interest rate outlook.

Energy markets also attracted attention after reports emerged that a cargo vessel had been attacked while transiting the Strait of Hormuz. The incident pushed West Texas Intermediate crude above $72 per barrel, while Brent crude climbed to around $75.50. Although shipping traffic has improved since the US-Iran ceasefire agreement, the latest security incident reminded investors that geopolitical risks remain capable of disrupting global energy markets.

Elsewhere, Bitcoin remained under pressure near $59,500, hovering close to its lowest level of the year as appetite for higher-risk assets stayed subdued. Gold rebounded nearly 1% to around $4,045 per ounce after falling below the $4,000 threshold during the previous session, while the US Dollar Index slipped 0.2% to 101.45.

Market Outlook

Markets are likely to remain highly sensitive to both inflation expectations and developments within the technology sector. While Micron's strong earnings may continue to support semiconductor and AI-related stocks, ongoing weakness among mega-cap technology names such as Apple and Nvidia could continue to weigh on broader equity indices, particularly the Nasdaq.

Investors will also closely monitor whether rising memory chip costs begin to affect technology companies' pricing power and profit margins, adding another layer of uncertainty to the sector. Meanwhile, oil prices are expected to remain volatile as traders balance improving shipping conditions through the Strait of Hormuz against persistent geopolitical risks. With Wall Street futures pointing lower and inflation remaining well above the Federal Reserve's target, market sentiment is likely to stay cautious heading into today's session.