Big Tech stocks experienced more drops on Wall Street Tuesday, overshadowing gains in the broader U.S. stock market. The S&P 500 slipped 0.5%, with two out of every three stocks within the index rising. The Dow Jones Industrial Average rose 0.5%, while the Nasdaq composite saw a 1.3% decline. PayPal rose 8.6% after exceeding profit expectations for the spring and raising its forecast for the full year. JetBlue Airways also climbed 12.3% after reporting a profit for the spring, surprising analysts. However, Microsoft’s 0.9% slide contributed to the S&P 500’s decline as investors awaited its latest profit report.
The so-called “Magnificent Seven” Big Tech stocks, including Nvidia, have been experiencing declines, leading to concerns about their valuations and expectations. Tesla and Alphabet’s underwhelming profit reports last week raised worries that other tech giants like Amazon, Apple, and Meta Platforms might also fail to impress. These stocks hold significant weight on the S&P 500 due to their large market value. However, smaller stocks and companies tied to the strength of the economy have been rising, cushioning some of the recent softness in Big Tech. These stocks rallied on hopes that inflation is slowing, potentially leading the Federal Reserve to cut interest rates soon.
The Russell 2000 index of smaller stocks added 0.3% on Tuesday, showing a market-leading gain for the month. While some experts predict the rotation from Big Tech to smaller stocks will continue, others urge caution, citing challenges like profitability issues among small-cap companies. Merck’s stock fell 9.8% despite stronger-than-expected results for the last quarter due to a profit forecast that fell short of expectations. Procter & Gamble also slid 4.8% after beating profit forecasts but falling short on revenue, impacted by shifting foreign exchange rates.
The S&P 500 fell 27.10 points to 5,436.44, while the Dow added 203.40 points to 40,743.33, and the Nasdaq composite dropped 222.78 points to 17,147.42. The Federal Reserve is not expected to cut interest rates this week but is likely to do so at its next meeting in September. Expectations of easier monetary policy have sent bond yields lower in the market, with the 10-year Treasury yield falling to 4.14%. Reports on job openings and consumer confidence came in stronger than expected, impacting bond yields. Stock markets abroad were mixed ahead of central bank decisions in Asia and Europe that could influence market dynamics.
In Asia, Japan’s Nikkei 225 added 0.1% ahead of a Bank of Japan meeting, while the FTSE 100 in London slipped 0.2% ahead of a Bank of England decision. Indexes in continental Europe were stronger following a report indicating stronger-than-expected economic growth in the second quarter for Eurozone countries. Overall, the global stock market is navigating uncertainties surrounding central bank decisions, inflation, and economic growth, with investors closely monitoring developments in both the U.S. and international markets.
