US stock indices finished mostly lower on Monday, August 25, 2026, as a sharp selloff in chipmaker and AI-infrastructure stocks overshadowed a solid start to Q2 earnings season. The S&P 500 fell 0.28% to a 2.5-week low, while the tech-heavy Nasdaq 100 dropped 0.97% to a 3-week low. The Dow Jones Industrial Average managed a modest 0.26% gain, buoyed by strength in financial and consumer stocks.
The broader market was under pressure from two main fronts: a significant decline in semiconductor stocks and the sudden collapse of trade negotiations between the US and Canada late last Friday. The breakdown in talks prompted the US to apply a 50% tariff on approximately $20 billion of Canadian goods, with Canada announcing retaliatory measures set to take effect on September 8.
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Chipmaker Selloff Hits Tech Sector
The weakness in technology stocks was led by the storage and semiconductor subsectors. Sandisk (SNDK) and Seagate Technology (STX) both closed down more than 6%, making them the biggest losers in the S&P 500 and Nasdaq 100. Western Digital (WDC) and Micron Technology (MU) followed with declines of more than 5%, while Advanced Micro Devices (AMD), Intel (INTC), and Marvell Technology (MRVL) each fell more than 3%. Nvidia (NVDA) also dropped more than 2%, leading losers in the Dow Jones Industrial Average.
The selloff was broad-based, hitting other major players including Microchip Technology (MCHP), Broadcom (AVGO), and Texas Instruments (TXN), all of which closed down more than 2%. This decline reflects growing investor caution about valuations in the AI-infrastructure space, which has been a primary driver of market gains over the past year.
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Oil Prices Slide as Middle East Tensions Show Signs of Easing
Energy markets provided some counterweight to the tech weakness, as October WTI crude oil futures (CLV26) fell more than 2% on Monday. The decline came after Axios reported that approximately 40 tankers transited out of the Strait of Hormuz last Friday night, transporting around 16 million barrels of crude. Adding to the bearish sentiment, the Joint Maritime Information Center lowered its threat level for shipping in the Gulf of Oman to “moderate,” suggesting the risk of attack is now possible but not likely.
The pullback in oil prices helped limit overall market losses by pushing inflation expectations and bond yields lower. The 10-year T-note yield fell 3 basis points to 4.70%, providing some support to growth-oriented stocks.
However, the geopolitical situation remains fluid. US Treasury Secretary Scott Bessent announced a campaign to sever Iran from the global economy, warning that any country doing business with Iran risks facing US sanctions. Iran’s secretary of the Supreme National Security Council responded forcefully, stating that “Iran will regard any country’s participation in or support for America’s economic war against the Iranian people as an act of war.”
Trade Tensions Hit Freight and Energy Sectors
The US-Canada trade dispute had an immediate impact on transportation and freight stocks. JB Hunt Transport Services (JBHT) closed down more than 5%, while FedEx Freight Holding (FDXF) and ArcBest (ARCB) each fell more than 4%. Knight-Swift Transportation (KNX) and Saia Inc (SAIA) also dropped more than 3%.
Energy producers and service providers also slid in tandem with crude oil prices. Diamondback Energy (FANG) and Halliburton (HAL) closed down more than 2%, while APA Corp (APA), ConocoPhillips (COP), Occidental Petroleum (OXY), and Chevron (CVX) all fell more than 1%.
Strong Q2 Earnings Season Provides Underlying Support
Despite Monday’s declines, the broader earnings picture remains a bullish factor for stocks. The S&P 500 is tracking for earnings growth of nearly 32% in Q2, well above the projected +23% and nearly four times the average earnings growth rate outside of the Covid period since Q4 2013, according to Bloomberg Intelligence. AI spending is expected to account for most of this growth, with AI infrastructure stocks projected to contribute nearly 60% of the S&P 500’s earnings-per-share growth in Q2.
So far, results have been overwhelmingly positive, with 86% of the 468 S&P 500 companies that have reported Q2 earnings beating estimates, according to Bloomberg data. This strong fundamental backdrop contrasts with the market’s recent price action, suggesting the selloff may be more about positioning and sentiment than deteriorating corporate fundamentals.
Looking ahead, markets are currently discounting a 43% chance of a +25 basis point rate hike at the next FOMC meeting on September 15-16. In Europe, markets are pricing in a 95% chance of a similar move by the ECB at its September 10 meeting. The coming week also brings a significant test for the tech sector, with Nvidia’s earnings report and Federal Reserve Chair Warsh’s Jackson Hole speech both on the calendar.
Disclaimer: This article is for informational purposes only and does not constitute financial advice. Market conditions are volatile and uncertain, and past performance does not guarantee future results. Readers should conduct their own research or consult with a qualified financial advisor before making investment decisions.
