The S&P 500 fell as much as 2.2% intraday Tuesday before dip buyers stepped in, as a tech selloff drove a rotation into energy and healthcare.
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S&P 500 stages late recovery as tech rout deepens, energy up 2%
The S&P 500 closed 0.26% lower after recovering from a 2.2% intraday plunge, while the tech-heavy Nasdaq Composite pared a 3.6% drop to finish 0.97% lower. The Dow Jones Industrial Average bucked the trend, adding 86 points, or 0.17%, as investors rotated out of growth stocks and into defensive and value sectors. More than 350 stocks in the S&P 500 closed higher despite the index's decline, highlighting the narrowness of the selloff.
"It's not unusual to see a period of consolidation after exceptional performance," said Bill Northey, senior investment director at US Bank Asset Management. The fundamentals underpinning the chipmaker rally this year are real, he said, but when one sector has such strong performance, "bouts of consolidation" should be expected "as enthusiasm ebbs and flows."
The technology sector within the S&P 500 fell 1.8%, its largest single-day drop since a 5.8% plunge the prior week. Semiconductor stocks bore the brunt of the selling, with the Philadelphia Stock Exchange Semiconductor Index tumbling as much as 8.5% intraday before closing nearly 2% lower. Marvell Technology sank 7.6%, while Qualcomm dropped 5.7% and Western Digital fell 5.6%. Broadcom, which is coming off its worst week in a year and a half after its guidance for AI chip revenue slightly missed expectations, fell 1.1% after sliding more than 6.5% during the session. Nvidia, the largest company in the S&P 500 by market value, recouped most of a 4% intraday loss to close 0.2% lower.
Energy was the top-performing sector, rising more than 2%, as Diamondback Energy gained 2% and crude oil prices stabilized after an initial decline. Healthcare stocks, which have gained nearly 6% over the past five sessions, continued to attract inflows as investors sought defensive exposure. Humana has risen 13% over that period, while UnitedHealth Group added 10% and Medtronic gained 11%.
The selloff coincided with three catalysts. Investors rotated out of AI-related names to raise cash for SpaceX's highly anticipated initial public offering, which could be the largest IPO in history. "Because all eyes are on the deal, people aren't looking at what other stocks they're going to be initiating new positions on," said Michael Monaghan, partner and portfolio manager at Founder ETFs. Separately, President Donald Trump posted on social media that Iran shot down a US Army Apache helicopter, vowing to respond, which added a geopolitical risk premium. Brent crude fell 3% to $91.45 a barrel, while West Texas Intermediate dropped 3.4% to $88.20, before paring losses after Trump's statement.
The Cboe Volatility Index remained elevated as traders priced in continued uncertainty. The 10-year US Treasury yield held above 4.5%, pulling some investors away from equities. Since hitting record highs on June 2, the S&P 500 and Nasdaq have fallen about 3% and 5%, respectively, though the S&P 500 remains up roughly 8% for the year.
"A lot of the selloff from our perspective is an opportunity to buy some really essential, critical AI infrastructure stocks at cheaper prices," said Rob Thummel, portfolio manager at Tortoise Capital.
This article is for informational purposes only and does not constitute investment advice.
[1] S&P 500 Index Expands Decline to 1%, Industrials Fall Over 2.4%, Tech Falls 1.6%, Energy Rises Over 2%[2] As Tech Stocks Slide, The Healthcare Sector Shines. Why Some Experts Say They Like This Defensive Play[3] Markets whipsaw as AI sell-off resumes - CNN[4] Tech Stocks Decline Amid SpaceX IPO Anticipation - GuruFocus[5] Nasdaq Composite falls 0.98% as tech stocks slide on chip weakness - eciks.org
