The S&P 500 was on track to post its worst quarterly performance since 2022 at the close of the first quarter, as investors pulled back from US equities in response to rising inflation fears, the economic fallout from the Iran war and a sharp selloff in large technology stocks tied to concerns over artificial intelligence.
Reuters reported that the benchmark index was down about 7% in the January to March period, its weakest quarter in four years, after oil prices surged and Treasury yields climbed on expectations that the Federal Reserve could maintain a more hawkish stance than investors had anticipated.
The 10 year US Treasury yield, which approached 4.50% last week for the first time this year, stood at about 4.336% on Monday, underscoring how energy driven inflation risks have complicated earlier market expectations for rate cuts. Strategists told Reuters that higher oil prices and uncertainty over the rate cycle had become a significant headwind for equities after a calmer start to the quarter.
The retreat has been particularly severe in megacap technology shares that powered the post pandemic bull market. All seven of the so called Magnificent Seven companies were down for the quarter, with Microsoft and Tesla each on track to lose more than 20%, while investors reassessed both the cost of AI infrastructure spending and the risk of AI driven disruption across software and related sectors.
Reuters also said concerns in private credit markets and renewed volatility tied to President Donald Trump’s tariff policies had added to the pressure, prompting some strategists to urge investors to focus on protecting gains rather than looking for near term buying opportunities
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