Wall Street overnight: Broadcom financing risk, weaker consumption and another oil shock

US stocks fell across the board overnight. Most megacap technology shares declined, with Broadcom down nearly 6% after Bank of America analysts flagged financing concerns. Memory, optical communications and drone stocks bucked the trend.

Oil strengthened again as tensions in the Middle East persisted. Both WTI and Brent futures gained more than 1%. US President Donald Trump warned that the United States would hit Iran hard economically. He also said he would soon declare the Strait of Hormuz to be US territory.

All three major US indexes close lower

On August 14 in New York, the Dow Jones Industrial Average fell 0.2%, the S&P 500 lost 0.17% and the Nasdaq Composite declined 0.28%.

Broadcom dropped almost 6%. Bank of America estimated that the company's chip-financing programme could generate about $370 billion of senior debt by mid-2029 to fund 20 gigawatts of computing capacity. It could add roughly $150 billion of debt in 2027 alone. Investors are reassessing the credit risk created by the rapid expansion of AI infrastructure financing.

Most other large technology shares also fell. Amazon lost close to 1%, Meta declined 0.86%, and Nvidia, Google and Microsoft edged lower. Tesla gained 0.68% and Apple rose 0.22%.

US memory stocks continued to advance. SanDisk jumped more than 7%, Seagate Technology rose over 5%, Western Digital gained more than 4%, Micron Technology added more than 2% and SK Hynix rose 0.4%.

Several optical communications stocks rallied. Applied Optoelectronics surged more than 15%, Lumentum gained over 5% and Corning rose more than 4%.

Drone stocks also climbed sharply. Unusual Machines jumped more than 25%, Red Cat Holdings gained over 8% and Draganfly rose more than 5%. A day earlier, the White House said the United States would impose tariffs on imported drones and components.

Jay Hatfield, chief executive of Infrastructure Capital Advisors, said the market's performance looked like the beginning of a post-earnings-season levelling-off. He said the S&P 500 could reach 8,100 by year-end if aggregate earnings among listed US companies held at current levels, oil continued trading near $80 a barrel and the Federal Reserve kept rates unchanged.

Bret Kenwell, US investment analyst at eToro, pointed to weak July consumption data. Retail sales fell 0.6% month on month, the biggest decline since May last year, while consumer confidence in the economy also weakened in August. One weak month of consumption does not mean the economy is collapsing, he said, but it would be difficult to ignore if disappointing GDP and employment data followed. The data should ease pressure on the Fed to raise rates.

Collin Martin, head of fixed-income research and strategy at the Schwab Center for Financial Research, said the retail report came in far below expectations. Combined with the earlier weak employment report, it could raise concerns about an economic slowdown. One month does not make a trend, however, and while the probability of a September rate increase has fallen, it has not disappeared entirely.

Trump issues a major warning

International oil prices rose again as tensions in the Middle East intensified. At the close, September WTI futures gained 1.42% to settle at $82.40 a barrel, while October Brent futures rose 1.67% to $88.52 a barrel.

According to CCTV News, Trump told reporters on August 14 that the United States would hit Iran hard economically. Speaking about Iran, he also said he would soon declare the Strait of Hormuz to be US territory.

At an event on Long Island, New York, Trump said Iran was suffering a crushing defeat. “After we completely defeat Iran, I will soon declare the Strait of Hormuz to be United States territory,” he said. He laughed as he made the remark, then added: “It's true.”

Trump also said high oil prices were a small issue compared with preventing Iran from obtaining nuclear weapons. He said he would “never apologise” because he had done the right thing.

In a social-media post on August 12, Trump said the United States had complete control of the Strait of Hormuz and that Iran could do nothing about it. Iran's Islamic Republic News Agency reported on August 13 that a spokesperson for the Khatam al-Anbiya Central Headquarters of Iran's armed forces said the strait was under Iran's complete control and no vessel could pass safely without Iran's permission.

Iran's Bright News Agency reported on August 14 that the Islamic Revolutionary Guard Corps had shot down a US MQ-9 Reaper drone over Hormozgan province. The report did not say when the drone was downed.

The Washington Post reported on August 13 that the US military had about 185 Reaper drones before hostilities with Iran began. The aircraft is used mainly for surveillance and precision strikes and has been deployed frequently near the Strait of Hormuz. The US military has lost at least 45 Reapers in the conflict with Iran, about 25% of its fleet, with a combined value of more than $1.3 billion.

Iran's Bright News Agency also published several photographs of drone and aircraft wreckage that day, saying they showed US and Israeli drones and aircraft intercepted by the Islamic Revolutionary Guard Corps using modern air-defence systems.