Stocks slide after Bank of America warning, chip rout

U.S. stocks fell on Tuesday after Bank of America advised clients to lock in gains. The S&P 500 dropped 1.63% to 7,261 and the Nasdaq Composite fell 2.86% to 25,188. The Dow Jones Industrial Average lost 0.50% to 50,533 and the Russell 2000 declined 1.53% to 279.77.

Analysts at Bank of America, led by Savita Subramanian, urged investors to take profits and warned of “too many red flags,” saying roughly 70% of the firm’s bear-market indicators have triggered. The bank also flagged that the S&P 500 appears expensive on 17 of 20 valuation measures, a view that prompted risk reduction among clients and contributed to broad selling.

Treasury yields rose as recent economic data left open the possibility of another Federal Reserve rate increase. The two-year yield moved above 4.1%. Higher yields make future corporate earnings worth less in today’s dollars, a factor that pressures growth and technology stocks.

The semiconductor sector extended a selloff after a major chip supplier kept its AI revenue forecast unchanged rather than raising it. Chipmakers led losses across tech: Advanced Micro Devices fell about 9.35%, Micron lost about 9.09%, and Oracle dropped roughly 5.75%. Apple slipped 3.65% amid reports of an upcoming CEO transition. The Nasdaq 100 moved toward a near 4% decline on the session.

Market breadth was negative, with decliners outnumbering advancers by about 53.2% to 43.1%. Investors shifted into yield-bearing and defensive names: real estate rose about 1.92%, consumer staples gained about 1.47% with support from J.M. Smucker, utilities added 0.87% and healthcare rose 0.82%. Energy fell roughly 2.13% as oil prices eased, and basic materials dropped about 1.44% amid a firmer dollar and higher borrowing costs.

A company-specific deal produced a large gain in the biotech sector. Nuvalent jumped about 39.5% after GlaxoSmithKline agreed to acquire the oncology firm for about $10.6 billion in cash, valuing Nuvalent near $124 per share, a premium close to 40% and including two late-stage lung cancer drug candidates.

A geopolitical comment during the session added volatility when the president stated that Iran had shot down a U.S. Apache helicopter, prompting a period of deeper intraday losses and reduced risk appetite for part of the trading day.

Traders are focused on the May Consumer Price Index due Wednesday, June 10, and the Federal Reserve policy meeting on June 16-17. April’s CPI rose 3.8% year over year; another high reading would strengthen expectations for further tightening. Technical observers note the S&P 500 needs to hold about 7,333 to maintain its recent pattern; a decline below that level would leave support near 7,287 and 7,040.