European and U.S. stock markets showed resilience on Tuesday, rebounding from an Asian market slump as investors balanced falling oil prices against upcoming Federal Reserve policy and tech earnings.

Key Points

• The Dow Jones Industrial Average rose 1% to reach within 1% of its record high, while European markets gained between 0.4% and 0.9%.
• The semiconductor index fell 4.5% to a three-month low, marking a 25% decline from its June 22 peak and entering technical bear market territory.
• Oil prices dropped 5%, contributing to an 18% decline in WTI and Brent crude benchmarks since the previous Thursday.
• Credit default swap costs for major tech firms, including Meta, Nvidia, and Amazon, reached record highs amid concerns over heavy AI capital expenditure.
• Apple’s market capitalization briefly surpassed $5 trillion, while Boeing and Coca-Cola shares each climbed 5%.

Why it Matters

The divergence between struggling semiconductor stocks and the broader market indices suggests a significant rotation in investor sentiment away from high-growth tech. This shift highlights growing market anxiety regarding the sustainability of massive AI-related capital spending and its impact on corporate credit risk.