NEW YORK — U.S. stocks experienced mixed trading on Tuesday, signaling a slowdown in Wall Street’s recent momentum after consecutive record highs. The S&P 500 managed a modest rise of 0.1% in the afternoon, while the Dow Jones Industrial Average surged by 452 points, or 1%, as of 2:02 p.m. Eastern time. Conversely, the Nasdaq composite saw a decline of 0.5%, largely due to significant drops in tech stocks.
Tesla was a major drag on the market, with its shares falling 5.6%. The decline comes amid a public rift between Tesla CEO Elon Musk and President Donald Trump. Previously allies, their relationship has soured, with Trump hinting at potential savings by scrutinizing government spending directed towards Musk’s companies. Tesla’s stock has already plummeted over 21% this year, partly due to this ongoing feud.
Tech Stocks Under Pressure
Other tech giants also contributed to the Nasdaq’s downturn. Nvidia, a key player in the artificial intelligence sector, saw its shares drop by 2.1%, making it one of the heaviest weights on the S&P 500. Despite these tech setbacks, more stocks within the index were on the rise, particularly in the casino and automotive sectors.
Casino companies rallied after reports of better-than-expected growth in Macao’s gaming revenue. Wynn Resorts and Las Vegas Sands saw their stocks climb by 8.8% and 8.9%, respectively. Meanwhile, automakers such as General Motors and Ford Motor enjoyed gains, with their shares increasing by 4.7% and 3.9%.
Economic Challenges and Market Optimism
The U.S. stock market has rebounded impressively from a springtime sell-off of approximately 20%. However, challenges loom, with one of the most significant being the impending threat of Trump’s tariffs. Although many proposed tariffs are currently on hold, they are scheduled to take effect shortly, potentially impacting the economy and exacerbating inflation.
Congress is also embroiled in debates over tax rate cuts and other fiscal measures that could escalate the U.S. government’s debt, further fueling inflation. This scenario could lead to higher interest rates, adversely affecting bonds, stocks, and other investments.
“Market bubbles are infamously difficult to predict and can endure far longer than anticipated before correcting,” noted Barclays strategists Stefano Pascale and Anshul Gupta.
Despite these hurdles, some strategists at Barclays have observed signs of euphoria among investors. They point to a measure of “excess optimism” nearing levels seen during the “meme stock” craze and the dot-com bubble. Additionally, the demand for “blank-check companies” seeking to acquire privately held firms indicates market exuberance.
Mixed Signals from the Economy
In the bond market, Treasury yields rose following mixed economic reports. One report indicated an increase in job openings in May, surpassing economists’ expectations, which could be a positive sign for the labor market. However, reports on U.S. manufacturing were mixed. The Institute for Supply Management noted a continued contraction in manufacturing activity, albeit less severe than the previous month.
A separate report from S&P Global suggested a return to growth in manufacturing production after three months of declines. The yield on the 10-year Treasury increased to 4.25% from 4.24%, while the two-year Treasury yield rose more sharply to 3.78% from 3.72%.
Federal Reserve Chair Jerome Powell reiterated the need for more evidence on the impact of Trump’s tariffs on the economy and inflation before resuming interest rate cuts. This stance comes despite Trump’s calls for the Fed to act swiftly to boost the economy through lower rates.
Global Market Reactions
Internationally, stock markets showed mixed results. In Asia, Japan’s Nikkei 225 fell by 1.2%, while South Korea’s Kospi rose by 0.6%. European markets also displayed varied performances, reflecting the global uncertainty surrounding economic policies and market conditions.
As Wall Street navigates these turbulent waters, the interplay between political dynamics, economic indicators, and investor sentiment will continue to shape the market’s trajectory in the coming weeks.
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