Nasdaq fell 1% Tuesday; chip and megacap shares dropped pre-Big Tech earnings; financial stocks kept Dow steady pre-Fed decision.
Microsoft, a leading AI frontrunner, will release its quarterly results post-market close; however, its stock dropped nearly 1%.
Other megacap stocks like Apple, Amazon, Meta, Alphabet, and Tesla fell 0.10% to 2% as investors awaited tech earnings.
AI favorite Nvidia fell 5%, causing a significant drop in chip stocks and a 2.4% decline in the Philadelphia SE Semiconductor index.
At 11:30 a.m., the Dow gained 65.08 points, while the S&P 500 and Nasdaq fell by 24.87 and 184.53 points, respectively.
The S&P 500 Financials index rose 1.3%, surpassing sector peers, while the bank index increased by 1.5%.
Due to Tesla’s weak results and Alphabet’s higher spending forecast, a market sell-off, led by megacap stocks, occurred last week.
The bar is high for these tech giants, as their quarterly results will reveal if they can drive more AI-led equity rallies.
“Big Tech has had a great rally, and for it to continue, they’re going to have to show the benefits of AI and the investments they made in it,” said Brian Klimke, chief market strategist at Cetera Investment Management.
“If not, we could see more of a rotation into smaller cap stocks and value stocks.”
As hopes for early rate cuts rise, investors are shifting from tech stocks to mid- and small-cap stocks.
The Russell 2000 rose 0.2% and is set to outperform major U.S. indexes in July; meanwhile, the Dow leads 2024.
With inflation improving and jobs easing, expectations for a Fed cut in September are high, with an 88% chance of a 25-bp reduction.
The Job Openings and Labor Turnover Survey revealed 8.18 million openings in June, surpassing the 8 million expected, ahead of Friday’s report.
Procter & Gamble fell 6% after missing fourth-quarter sales expectations; thus, it led the decline among single stocks.
Merck dropped 10% due to a profit forecast cut, while CrowdStrike fell 9% after Delta Air Lines sought compensation from both Microsoft and the firm.
F5 surged 11.2% after forecasting Q4 results that exceeded estimates. Consequently, confidence in their performance increased.
On the NYSE, advancing issues outnumbered decliners by a ratio of 1.16-to-1, while on the Nasdaq, it was 1.31-to-1.
The S&P 500 reached 62 new 52-week highs, while the Nasdaq Composite hit 92 new highs and 80 new lows.
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