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Tech stocks extended their recent decline on Tuesday, as investors shifted focus away from some of the market's biggest winners. This shift occurred amidst a flurry of earnings reports and anticipation of upcoming economic data and Federal Reserve commentary, which could provide insights into the broader market outlook.
Market Performance Overview
The tech-heavy Nasdaq Composite dropped 1.3%, while the S&P 500 fell 0.5%, with several major tech stocks losing ground. Notably, Nvidia shares declined by 7%, Microsoft shares fell by 0.9%, and Amazon.com shares slid 0.8%. In contrast, the Dow Jones Industrial Average, which includes fewer tech stocks, rose by 0.5%, or approximately 203 points. The Russell 2000, a small-cap benchmark, added 0.3%, further widening its lead over tech-heavy indexes.
Tech Sector Challenges and Market Rotation
The recent performance of the Nasdaq and other tech-heavy indexes reflects a broader market rotation away from high-flying tech stocks. So far in July, the Russell 2000 has outperformed the Nasdaq by 12.8 percentage points, while the Russell 1000 Value index has surpassed its growth-stock counterpart by 9 points. Both indexes are on track for their largest monthly leads since February 2001, according to Dow Jones Market Data.
This shift comes as investors reassess the valuations and growth prospects of tech companies amid a changing economic landscape. The upcoming earnings reports and economic data releases, including insights from the Federal Reserve and labor market statistics, are expected to provide further clarity on the sector's outlook.
Notable Stock Movements
While many tech stocks struggled, other sectors saw notable gains. PayPal shares jumped 8.6% after the digital-payments company exceeded earnings expectations and raised its annual earnings guidance. Stanley Black & Decker shares rallied 10% following the power-tool maker's positive earnings outlook for the year.
On the downside, Merck shares tumbled 9.8% after the pharmaceutical company lowered its earnings forecast for the year. Procter & Gamble shares also fell 4.8%, as the consumer goods giant reported lower-than-expected sales.
Bond and Commodity Markets
In the bond market, the yield on the benchmark 10-year U.S. Treasury note fell to 4.143%, down from 4.176% the previous day. The decline in yields reflects ongoing concerns about economic growth and inflation, as well as investor caution ahead of key economic data releases.
Oil prices continued their downward trend, with Brent crude falling 1.4% to $78.63 per barrel. The decline in oil prices reflects concerns about global demand and potential oversupply.
