The Dow Jones Industrial Average rebounded to a new record close on Tuesday, while the Nasdaq Composite struggled as investors shifted money from technology stocks to other parts of the market that were trading lower.
The Dow, which includes 30 stocks, rose 559.33 points, or 1.18%, to close at 47,927.96, and Wall Streeters bought shares of a variety of top names, including healthcare giants Merck, Amgen and Johnson & Johnson. The S&P 500 also rose 0.21% to end at 6,846.61. However, the technology-advanced Nasdaq lost 0.25% to end at 23,468.30.
Artificial intelligence cloud infrastructure services provider CoreWeave was among the laggards during trading. Shares fell more than 16% after the firm’s guidance disappointed investors, hurting AI trading. Additionally, shares of AI chip darling Nvidia fell about 3% after SoftBank sold its entire stake in the chip maker for more than $5 billion.
“These tech firms, they’re cash flow machines,” said Bill Fitzpatrick, a portfolio manager at Logan Capital Management, in an interview with CNBC. “They’re great companies, but the starting point is important, and given where they’re valued today, it doesn’t take much – a little bit of negative news – to change the sentiment a little bit and get a relaxation that’s more favorable to share value.”
AI trading has come under pressure this month amid growing concerns about valuations, sending the Nasdaq’s year-to-date monthly losses around 1%. On Tuesday, notable names in the game such as Micron Technology, Oracle and Palantir Technologies fell in line with CoreWeave and Nvidia. Micron fell by almost 5%, while Oracle and Palantir retreated by about 2% and more than 1%, respectively. The Technology Select Sector SPDR (XLK), which tracks the technology sector of the S&P 500, fell roughly 1%, SEEbiz reports.
“[S&P 500] it trades well above 20 times. It will be biased upwards due to [‘Veličanstvenih sedam’] and other technology firms,” he added, noting that some names were “lagging behind” in the growing market. “There’s so much capital spending expected over the next few years that if there’s even a pullback on that front … it would send a message that maybe things have picked up a bit.”
Adding to the negative sentiment seen on the Nasdaq on Tuesday, a new report from ADP revealed that for the four weeks ended Oct. 25, private sector job creation fell by an average of more than 11,000 per week. The data contrasted with the October gains reported by the firm last week and signaled some weakness in the labor market.
