U.S. stocks trimmed losses from a turbulent June on Tuesday, with European and Asian indexes climbing as investors weighed the costs of artificial intelligence hype against signs of continued economic momentum. The S&P 500 rose 0.6%, though it was still heading for its first losing month after two strong ones. The Dow Jones Industrial Average was up 135 points, or 0.3%, as of noon Eastern time, and the Nasdaq composite was 1.2% higher.
The Japanese yen dropped near its lowest level against the U.S. dollar in 40 years, raising questions about whether Tokyo will intervene to support its currency. Japan's finance minister said only that the government was ready to "respond appropriately whenever necessary." U.S. government bonds are paying much higher yields than their Japanese counterparts, and the possibility of rate hikes by the Federal Reserve is putting more pressure on the yen.
AI Bubble Deflates
The main reason for June's weakness has been a fall to Earth for stocks in the artificial-intelligence industry. After soaring to tremendous heights in the frenzy around AI, such stocks came under pressure because of worries that they had shot too high. AI stocks were stronger Tuesday, with Nvidia rising 1.6% to trim its loss for the month. Microsoft, which is investing heavily in AI, rose 0.7% to bring its loss for the month back below 18%. Oracle fell 1.6% to bring its drop for June to nearly 36%.
The correction reflects a market reassessment of whether current valuations can be justified by actual earnings growth. Investors want to see strong growth in profits to justify the big gains stocks made early in the quarter. Despite June's drop, the S&P 500 was still on track for its best quarter since six years ago, when stocks rocketed out of the crash caused by the COVID pandemic.
Concentrix tumbled 16.7% after the technology company reported profit and revenue for the latest quarter that were just shy of analysts' expectations.
Mixed Economic Signals
Outside of AI, the economy appeared to be rumbling along even though U.S. households were still feeling sour about it. A report released in the morning said U.S. employers were advertising many more job openings at the end of May than economists expected. A second report said confidence among U.S. consumers improved by less than economists expected. More Americans are saying it's hard to get a job, according to a survey by the Conference Board, even with data suggesting continued hiring.
The disconnect between official employment data and consumer sentiment underscores the uneven nature of the post-pandemic recovery. Tuesday's relatively quiet trading came as companies closed their books for the quarter running from April through June.
Oil Markets Eye Iran Talks
In the oil market, prices drifted as two U.S. envoys arrived in Qatar for talks with mediators about the implementation of an initial deal to end the war in Iran. The Americans were not having direct negotiations with Iranian diplomats while in Doha. The price for a barrel of Brent crude oil, the international standard, erased an early, modest rise and dipped 0.6% to $73.47. The hope is that an end to the war will restore full access to the Strait of Hormuz, allowing oil tankers to move more crude and lower its price.
Expensive oil has already sent inflation jumping around the world, which in turn has raised worries that the Federal Reserve and other central banks may have to raise interest rates. Higher rates would keep a lid on inflation, but they would also slow economic growth and hurt prices for investments. The yield on the 10-year Treasury rose to 4.40% from 4.38% late Monday.
European and Asian Gains
Germany's DAX returned 1.5%, and South Korea's Kospi climbed 1% for two of the world's bigger gains. Japan's Nikkei 225 rose 0.9% as the value of the Japanese yen dropped near its lowest level against the U.S. dollar in 40 years.
Why This Matters:
The AI stock correction demonstrates the risks of speculative investment in emerging technologies before business models prove sustainable. European and Asian markets remain exposed to U.S. monetary policy decisions, particularly as the Federal Reserve weighs further rate increases to combat inflation driven by oil prices. The weakness of the Japanese yen against the dollar reflects the divergence in monetary policy between major economies — with direct consequences for European exporters competing in Asian markets. Meanwhile, the disconnect between strong employment data and weak consumer confidence in the U.S. suggests households are bearing real costs from inflation that official statistics may understate. Oil price movements tied to geopolitical developments in Iran continue to threaten Europe's energy security and economic competitiveness, reinforcing the need for diversified energy sources and reduced dependence on volatile regions.