By Chuck Mikolajczak
NEW YORK (Reuters) – U.S. stock indexes and the Nasdaq closed lower on Tuesday, weighed down by weakness in chip and mega-cap stocks ahead of earnings from Big tech this week, but the Dow eked out modest gains.
Microsoft (O:), widely seen as the leader in the artificial intelligence race, fell ahead of its quarterly results due after the market closes.
Chipmaker Nvidia (NASDAQ:NV), seen as one of the biggest beneficiaries of ai's potential growth and the second-best performer of the year in the S&P 500, fell, weighing on other chip stocks and the Philadelphia Semiconductor Index.
Other large-cap companies, including Apple (NASDAQ:), amazon.com (NASDAQ:) and Meta Platforms (NASDAQ:), were due to report results this week. Shares of amazon and Meta fell, while Apple managed a slight gain due to growing concerns that the stock may be overvalued.
“A lot of people are looking at artificial intelligence and saying it's great, but how can I make money with it?” said Stephen Massocca, a senior vice president at Wedbush Securities in San Francisco.
“The companies are probably doing well financially, but the question is how much do you pay for it? These are not cheap stocks, so you have to keep your eyes open when investing in them.”
According to preliminary data, the S&P 500 lost 27.08 points, or 0.50%, to close at 5,436.46, while the Nasdaq Composite lost 222.78 points, or 1.28%, to close at 17,147.42. The Dow Jones Industrial Average rose 205.96 points, or 0.51%, to close at 40,745.89.
Small-cap and value stocks such as financials outperformed the broader market to extend a recent rotation into more expensive stocks as the market has cemented expectations that the Federal Reserve will cut rates this year following signs of easing inflation.
The S&P 500 financial index rose, leading gains among the 11 major S&P sectors, while technology was the worst performer.
Mega-cap stocks fell last week on disappointing results from Tesla (NASDAQ:) and higher spending forecasts from Alphabet (NASDAQ:), triggering a broad market sell-off.
The market is pricing in a slim chance that the Fed will cut rates by at least 25 basis points at the end of its policy meeting on Wednesday, but is fully pricing in a cut by the U.S. central bank's September meeting, CME's FedWatch tool showed.
Several jobs data are due for release this week, culminating in the government's payrolls report on Friday. On Tuesday, a survey of job openings and labor turnover pointed to 8.18 million openings in June, compared with economists' expectations of 8 million.
Among individual stocks, Procter & Gamble (NYSE:) fell after missing fourth-quarter sales expectations.
Merck plunged after the drugmaker cut its annual profit forecast. CrowdStrike (NASDAQ:) fell following a report that Delta Air Lines (NYSE:) sought compensation from the cybersecurity firm and Microsoft for the airline's global cyber outage earlier this month.
Cybersecurity and cloud services firm F5 jumped nearly 100% after forecasting fourth-quarter results that beat estimates.
(This story has been republished to correct S&P 500 link in paragraph 7)
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