Key Takeaways:
The Dow Jones Industrial Average surged more than 540 points, or about 1%, as strong corporate earnings and falling oil prices offset a deepening selloff in semiconductor stocks.
"The market is rotating away from the crowded AI trade into sectors that are delivering real earnings growth," said Sarah Lin, equity strategist at Edgen. "Lower oil is providing an additional tailwind for consumer and industrial names."
The S&P 500 added 0.28% to 7,446.10, while the Nasdaq Composite fell 0.63% to 27,899.60, dragged lower by chip stocks. The Dow closed at 52,903.00. Among the top performers, IQVIA surged 13.18%, Sherwin-Williams gained 8.33% and Cognizant rose 7.97%. On the losing side, Corning dropped 15.59%, Dell fell 10.01% and Seagate Technology lost 8.97%.
The divergence between the Dow and Nasdaq underscores a rotation underway as investors question whether AI-driven semiconductor valuations have run ahead of fundamentals. The Federal Reserve's two-day policy meeting, which began Tuesday, adds another layer of uncertainty, with markets pricing a 30% chance of a surprise rate hike.
The semiconductor selloff intensified after South Korea's SK Hynix tumbled 14.5%, its worst single-day drop in years, following a blockbuster debut from Chinese memory maker ChangXin Memory Technologies. CXMT surged roughly 500% on Shanghai's STAR Market, instantly becoming the mainland's most valuable listed company with a valuation near $540 billion. Samsung Electronics fell more than 8%, and the Philadelphia Semiconductor Index sank 4.2% on Monday, with losses extending into Tuesday's Asian session.
The rotation into value and cyclical names was supported by a drop in crude oil prices, which eased pressure on transport and consumer stocks. UPS rose after reporting earnings that beat estimates and issuing an upbeat outlook for the remainder of the year. Coca-Cola also gained after raising its full-year guidance on strong sales. Boeing climbed despite posting a wider-than-expected loss, as revenue topped analyst forecasts.
In a signal of confidence from corporate insiders, Elevance Health Chief Executive Officer Gail Boudreaux spent $1 million buying 2,725 shares after the stock fell on earnings. The health insurer beat EPS estimates by $1.24 and raised guidance, though a pullback in core profit margins weighed on the stock.
The Federal Reserve's two-day meeting began Tuesday, with Chair Kevin Warsh presiding over his first rate decision since taking office in May. Most economists expect the central bank to hold rates at 3.50% to 3.75%, though traders see a roughly 30% probability of a hike, according to CME FedWatch data. Inflation remains above the Fed's 2% target at a 3.5% annual pace, and Warsh's reduced forward guidance has left markets guessing.
This article is for informational purposes only and does not constitute investment advice.
