Wall Street's record rally ended abruptly on Tuesday, hit by slumping AI stocks amid concerns over OpenAI's spending and rising oil prices fueled by the Iran war. While major tech companies prepare to report earnings, some firms like Coca-Cola and JetBlue managed to post gains, offering a mixed picture for investors.
Wall Street experienced a significant downturn on Tuesday, bringing its record-setting rally to a halt. The primary drivers of this weakness were slumping AI stocks and a notable climb in oil prices amidst the ongoing Iran war. A report from The Wall Street Journal highlighted concerns among OpenAI leaders regarding the sustainability of its massive data center spending, especially after missing targets for new users and revenue. This has intensified criticism that the entire AI industry might be an overspending bubble, potentially lacking the returns to justify investments. Major AI spenders like Alphabet, Amazon, Meta Platforms, and Microsoft are scheduled to report their Q1 2026 results on Wednesday, which could provide further clarity on AI investment returns. Concurrently, oil prices continued their ascent due to persistent uncertainty surrounding the Iran war, particularly concerning the Strait of Hormuz. Brent crude for June delivery rose 2.7% to $111.18, with July delivery also climbing. U.S. gasoline prices reached $4.18 per gallon, the highest since 2022. The Trump administration appeared unlikely to accept Iran's offer to reopen the Strait in exchange for lifting U.S. blockades. Despite the broader market weakness, some companies provided positive news. JetBlue Airways saw its stock rise 2.3% despite a larger-than-expected loss, as CEO Joanna Geraghty reported strengthening customer demand and announced cost-cutting measures. Coca-Cola's stock rallied 5.7% after exceeding profit and revenue expectations, driven by strong performance in China, the U.S., and India. In the bond market, Treasury yields remained relatively steady, with the 10-year Treasury yield at 4.36%, following a report indicating slightly increased U.S. consumer confidence in April. Looking ahead, the Federal Reserve is expected to keep short-term interest rates steady on Wednesday. The Senate Banking Committee is also slated to vote on Kevin Warsh's nomination to succeed Fed Chair Jerome Powell. Internationally, European markets were mixed, while Asian markets fell, notably Japan's Nikkei 225, after the Bank of Japan maintained its key interest rate.
