Nasdaq 100, Dow Jones, S&P 500 News: Blue Chips Retreat as Tech Sector Surges

Tech Stocks Lead Nasdaq Rebound; Dow Retreats

The Nasdaq surged on Tuesday as AI-related stocks recovered, while the Dow pulled back from recent highs. Investors remain focused on upcoming inflation data that could shape the Federal Reserve’s monetary policy decisions.

At 15:08 GMT, the Dow Jones Industrial Average is trading 39176.97, down 234.24 or -0.59%. The S&P 500 Index is at 5459.61, up 11.74 or +0.22% and the Nasdaq-100 Index is trading 17659.18, up 162.36 or +0.93%.

Tech Giants Stage Comeback

Nvidia, the AI chip powerhouse, gained 3.3% after three consecutive down sessions. Other semiconductor stocks followed suit, with Taiwan Semiconductor Manufacturing, Broadcom, and Qualcomm advancing between 0.5% and 1.6%. The broader S&P 500 technology sector rose 1.0%, partially recouping Monday’s losses.

Market Divergence Raises Questions

While tech stocks have driven the S&P 500 and Nasdaq to record highs this year, the Dow Jones Industrial Average has significantly underperformed. This disparity has sparked concerns about the overall strength and sustainability of the market rally.

Economic Indicators and Fed Outlook

The June U.S. consumer confidence index dipped slightly to 100.4, aligning with expectations. Investors are keenly watching for signs of economic weakness that could influence the Fed’s rate decisions. Currently, market participants see a 61% chance of a 25-basis point rate cut in September.

Fed Officials Signal Caution on Rate Cuts

Fed Governor Michelle Bowman stated that it’s not yet time to lower interest rates, echoing sentiments from other policymakers. San Francisco Fed President Mary Daly rejected the idea of preemptive rate cuts, emphasizing the need to see more progress on inflation before considering policy changes. Chicago Fed President Austan Goolsbee indicated that “more months” of good inflation data would be needed to question the current restrictive policy stance. These comments suggest the Fed remains committed to its inflation-fighting efforts, potentially tempering market expectations for near-term rate cuts.

Individual Stock Movements

Several stocks made notable moves:

• Spirit AeroSystems (SPR) dropped 5.3% following reports of a potential Boeing acquisition.
• Carnival Corp (CCL) gained 3.7% after raising its annual profit forecast.
• SolarEdge Technologies (SEDG) plummeted 17% on news of a $300 million convertible notes offering.
• Pool Corp (POOL) fell 8% after lowering guidance.

Short-Term Forecast: Cautiously Bullish

While tech stocks are rebounding, the market remains sensitive to upcoming economic data, particularly Friday’s PCE price index release. The tech-driven rally appears more fundamentally sound than previous bubbles, supported by strong earnings. However, investors should brace for potential volatility as the Fed balances inflation concerns with economic growth prospects. The divergence between tech performance and broader market indicators suggests a measured approach in the near term.

Technical Analysis

E-mini Nasdaq-100 Index futures are edging higher on Tuesday as bargain hunters to stop the current three-day slide. However, the chart pattern suggests the way of least resistance is down, following last week’s closing price reversal top.

The minimum downside target is a short-term pivot at 19436.00. This is followed by the 50-day moving average at 18729.81. Essentially, I believe the index is too far above this moving average and the 200-day moving average at 17607.17 to sustain the rally.

With a sector rotation taking place, the Nasdaq-100 could fall into a trading range.