SynopsisWall Street faced a downturn as escalating tensions in the Middle East triggered a surge in bond yields. A steep decline was particularly evident in technology stocks, with semiconductors taking the brunt of the losses. Investors pivoted from growth-focused sectors to safer bets like healthcare. Additionally, oil prices rose amidst geopolitical instability and changes in military strategies.APA general view shows the New York Stock Exchange, Friday, Aug. 7, 2026, in New York. (AP Photo/Yuki Iwamura)Wall Street closed lower on Tuesday with semiconductors leading technology declines as Middle East uncertainty pushed bond yields to multiyear peaks, feeding concerns about borrowing costs and inflation.Fading hopes for Middle East peace pushed oil prices higher, which in turn triggered an increase in U.S. 30-year Treasury bond yields to their highest levels since 2007. Ten-year ‌bond yields touched their ⁠highest ⁠level since January 2025.The Philadelphia SE Semiconductor Index tumbled as investors fled stocks that had rallied previously on booming AI-related demand. Rising borrowing costs lowered ​how much investors were willing to pay for potential growth in technology profits."It starts off almost like a domino effect. Talks break down. ​That leads to oil prices going up. That leads to higher inflation expectations and bond yields rise," said Burns McKinney, portfolio manager at NFJ Investment Group. He added that "every time bond yields rise, that tends to disproportionately hit the technology ​names."According to preliminary data, the S&P 500 lost 51.97 points, or 0.67%, to ⁠end at ‌7,692.10 points, while the Nasdaq Composite lost 350.45 points, or 1.31%, to 26,294.46. The Dow Jones ​Industrial Average fell ​115.93 points, or 0.22%, to 53,343.85.Among the S&P 500's 11 major sectors, the information technology ⁠sector created the biggest index-point drag on the day and was the benchmark's ​biggest percentage loser.The S&P 500's biggest drags from individual stocks came from chip companies, including leading AI chipmaker Nvidia and memory chipmaker Micron Technology, which fell on Tuesday after rising almost 18% in the previous five sessions.Other hard-hit stocks included data storage firms Sandisk and Western Digital, while the Roundhill Memory ETF tumbled after five straight sessions of gains."There's nothing that can crack a momentum rally quite like interest rates moving higher and you're getting evidence of that today," said Tony Welch, chief investment officer at SignatureFD, who added that rising yields ‌suggested that Federal Reserve policy is too easy for the growth and inflation outlook.While they left high-growth sectors, investors flocked instead to more defensive sectors such as healthcare and consumer staples. Wall Street's ​fear gauge rose to ​its highest level since August ⁠5. With support from rising oil prices, the S&P 500 energy sector also outperformed. By late afternoon, U.S. crude oil futures had pared most of their gains but still settled up 0.5%, after Iran threatened to shift to a "fully offensive" military ​posture and Washington ruled out extending a ceasefire deal. Shares of home-improvement retailer Home Depot inched up after beating second-quarter sales estimates.Investors awaited results due later this week from other retailers, including bellwether Walmart. Minutes from the U.S. Federal Reserve's July meeting, due on Wednesday, could offer more clues about how the central bank is assessing the current environment.Investors see Nvidia's upcoming quarterly report as the next big test for the AI-driven momentum.Read More News on(What's moving Sensex and Nifty Track latest market news, stock tips, Budget 2025, Share Market on Budget 2025 and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .) Subscribe to ET Prime and read the Economic Times ePaper Online.and Sensex Today. Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price...moreless(You can now subscribe to our ETMarkets WhatsApp channel)Read More News on(What's moving Sensex and Nifty Track latest market news, stock tips, Budget 2025, Share Market on Budget 2025 and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .) Subscribe to ET Prime and read the Economic Times ePaper Online.and Sensex Today. Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price...moreless