The S&P 500 slipped to $7,350 on Tuesday after hitting a fresh all-time high of 7,428.97, as investors reacted to hotter-than-expected inflation data, rising oil prices, and renewed concerns surrounding the Middle East conflict. The retreat marked a pause in Wall Street’s powerful rally that pushed major indexes to repeated record highs throughout 2026.
The benchmark index fell roughly 0.8% in morning trading, while the Nasdaq Composite dropped nearly 1% as technology and semiconductor stocks led losses across the market. The Dow Jones Industrial Average also moved lower after briefly opening in positive territory.
Investor sentiment weakened after another jump in crude oil prices fueled fears that inflation pressures may remain elevated for longer than markets previously expected.
Oil Prices and Inflation Pressure Stocks
Brent crude climbed toward $108 per barrel as tensions surrounding the fragile US-Iran ceasefire continued disrupting tanker movements through the Strait of Hormuz. The prolonged conflict has severely impacted global crude supply flows, keeping energy markets on edge.
Higher oil prices immediately reignited concerns about inflation. Fresh economic data released Tuesday showed consumer price pressures remained hotter than expected in April, complicating hopes for aggressive Federal Reserve rate cuts later this year.
That combination hit growth stocks particularly hard. Artificial intelligence-linked companies and semiconductor firms, which powered much of the market’s rally this year, faced sharp profit-taking.
Intel dropped nearly 5% after an explosive rally earlier in 2026, while Micron Technology fell around 4%. CoreWeave slid 8% as investors rotated away from high-valuation AI plays.
The weakness also followed a broader decline in Asian markets. South Korea’s Kospi index dropped 2.3% from record highs amid fears that policymakers could target profits tied to the AI boom.
Wall Street Splits on Market Outlook
Even as markets pulled back, some strategists continue raising their targets for the S&P 500. Veteran analyst Ed Yardeni recently lifted his 2026 year-end target to 8,250 from 7,700, citing stronger corporate earnings and improving revenue projections.
Yardeni also maintained his longer-term view that the S&P 500 could eventually reach 10,000 by 2029, though he acknowledged risks tied to inflation, geopolitical instability, and elevated valuations.
His optimism reflects growing confidence among some analysts that AI spending and corporate earnings growth can continue supporting higher stock prices despite macroeconomic uncertainty.
Still, not everyone on Wall Street shares that view.
Michael Burry Warns of “Parabolic” Market Conditions
Investor Michael Burry, known for predicting the 2008 housing crash, issued another warning about current market conditions. In a recent post, Burry argued that the Nasdaq 100 now resembles the final stages of the dot-com bubble.
He pointed specifically to semiconductor stocks, noting that the Philadelphia Semiconductor Index has surged nearly 70% since late March. According to Burry, technology valuations now sit far above sustainable levels.
The investor claimed Wall Street may overstate earnings growth for many high-profile AI companies by more than 50%. He described the current market as “the scene of the bloody car crash, minutes before it happens.”
Despite the warning, Burry advised investors against aggressively shorting stocks because momentum-driven rallies can continue longer than expected. Instead, he recommended reducing exposure to overextended technology names and locking in profits from recent gains.
Market data also highlights how concentrated the rally has become. Sundial Capital Research noted this marks only the fourth time the S&P 500 reached a record high while such a small percentage of members traded near 52-week lows.
For now, Wall Street faces a difficult balancing act. Strong earnings and AI enthusiasm continue supporting stocks, but rising oil prices, sticky inflation, and geopolitical tensions increasingly threaten the market’s momentum.
