Tech Stock Sell-Off Drags Nasdaq and S&P Lower While Dow Rallies

U.S. stock markets closed mixed Tuesday as the Nasdaq and S&P 500 slipped due to a sharp sell-off in overbought large-cap tech stocks, while the Dow Jones ended higher on gains in cyclical sectors. The Nasdaq dropped 0.82% to 20,202.89 and the S&P 500 edged down 0.11% to 6,198.01. In contrast, the Dow surged 0.91%, rising 400.17 points to 44,494.94.

Weakness in tech stocks, particularly among megacaps tracked by the NYFANG index—which fell 1.8%—weighed on overall sentiment. Mizuho’s Farz Azarm noted that recent extreme bullishness in tech led to a “massive unwind” of gains.

Low liquidity contributed to volatility, but investor optimism was buoyed by President Trump’s statement that he would not extend the July 9 deadline for global trade negotiations. Meanwhile, the Senate’s approval of Trump’s sweeping tax package sparked debate over its stimulative impact versus its $3.3 trillion cost.

Tesla shares tumbled 5.4% following renewed tensions between CEO Elon Musk and Trump, who threatened to withdraw federal subsidies from Musk’s companies. Despite the tech downturn, the Dow was lifted by economically sensitive stocks, with the Dow Transportation index jumping 2.9%, its strongest single-day rise since May.

Economic data also showed resilience. May job openings rose unexpectedly, while the ISM manufacturing PMI ticked up to 49.0. These indicators, along with Powell’s cautious tone on rate cuts, reinforced expectations for the Fed to hold steady near-term.

Money markets now price in a 21.2% chance of a July rate cut, with 64 basis points projected for 2025. Meanwhile, Macau’s jump in gambling revenue boosted shares of U.S. casino operators, with Wynn, MGM, and Las Vegas Sands each climbing over 7%.