Rate-hike worries hit global stocks as tech shares lead declines

Stock markets fell across major regions Tuesday as investors reassessed the path of U.S. interest rates under new Federal Reserve chair Kevin Warsh, Fortune reported. The shift hit technology shares hardest, with SpaceX among the sharpest decliners after a selloff erased $400 billion of market value, according to the Financial Times.

U.S. futures pointed lower before the New York open, extending losses from the previous session. Fortune reported that S&P 500 futures were down 1.37% after the index slipped 0.37% on Monday.

European markets also weakened in early trading. Fortune said the Stoxx 600 fell 1.09%, while the U.K.’s FTSE 100 was down 0.76% before lunch.

The pressure was broader in Asia. Fortune reported that South Korea’s KOSPI dropped 9.99%, Japan’s Nikkei 225 fell 3.55%, India’s Nifty 50 lost 0.82% and China’s CSI 300 declined 2.77%.

Fed outlook shifts

Investors had widely expected the Fed to leave rates at 3.5%, Fortune reported. Warsh’s first rate-setting statement struck a more hawkish tone, and traders now expect a rate increase later this year, according to Fortune.

Bank of America U.S. economist Aditya Bhave told clients he expects three quarter-point increases this year, in September, October and December. Bhave said that path would take the policy rate to a range of 4.25% to 4.5%.

Bhave also told clients that inflation is likely to stay persistent enough to keep real policy from becoming too restrictive, Fortune reported. His forecast is more aggressive than the current futures market pricing described by Fortune.

The prospect of higher borrowing costs weighed on technology companies because many large AI infrastructure builders have been using debt to fund capital spending. Barclays estimates that AI hyperscalers will issue $200 billion in new debt this year, according to Fortune.

SpaceX and tech stocks slide

SpaceX fell 16.43% on Monday, cutting $400 billion from its market capitalization, the Financial Times noted, according to Fortune. The stock closed at $154.60, still above its $135 initial offering price, Fortune reported.

Other speculative parts of the market had already drawn warnings before Tuesday’s decline. Apollo Global Management’s Torsten Sløk wrote that companies with negative earnings had outperformed profitable companies over the past year, saying price discovery appeared impaired, Fortune reported.

Oil offers some relief

Oil prices moved lower even as equities sold off. Fortune reported that Brent crude traded at $77 a barrel Tuesday morning, down from $79 the previous day, while Bitcoin traded at $62,000.

Fortune attributed the decline in crude to expectations that Iran and the U.S. could reach an understanding that keeps the Strait of Hormuz open. Alpine Macro’s Chen Zhao said in an email that crude could fall further into a range of $50 to $60 a barrel, according to Fortune.

Zhao also said lower oil prices could affect the Fed’s view of structural inflation and the future path of U.S. monetary policy, Fortune reported. For now, equity investors are focused on the risk that borrowing costs rise sooner than many had expected.

This story draws on original reporting from Fortune.