NEW YORK (AP) — U.S. stocks experienced a turbulent session on Tuesday as Wall Street’s recent momentum showed signs of slowing. The S&P 500 slipped by 0.3% in midday trading, potentially marking its first loss in four days. Conversely, the Dow Jones Industrial Average climbed 398 points, or 0.9%, as of 11:45 a.m. Eastern time, while the Nasdaq composite fell by 1%.
Tesla, a significant player in the tech sector, exerted downward pressure on the market amid escalating tensions between its CEO, Elon Musk, and former President Donald Trump. Once allies, Musk and Trump have been at odds recently, with Trump hinting at potential savings by scrutinizing subsidies and contracts with Musk’s companies. As a result, Tesla shares dropped 4.9%, contributing to its over 21% decline this year, partly due to the ongoing feud.
Tech Sector Woes and Broader Market Movements
In addition to Tesla, several tech stocks that had previously benefited from the artificial intelligence boom also saw declines. Notably, Nvidia’s shares fell by 3.3%, significantly impacting the S&P 500. Despite these setbacks, the index saw more gains than losses, driven by a rally in casino stocks. Positive growth in gaming revenue in Macao, China’s casino hub, led to an 8.4% rise in shares of both Wynn Resorts and Las Vegas Sands.
Automakers outside of Tesla also performed well, with General Motors and Ford Motor seeing increases of 5.3% and 4.3%, respectively. This broader market resilience comes as the U.S. stock market continues its recovery from a springtime sell-off of approximately 20%.
Economic Challenges and Market Sentiment
Despite the market’s recovery, significant challenges remain. One of the largest threats is the potential impact of Trump’s tariffs, which are scheduled to take effect soon. These tariffs could harm the economy and exacerbate inflation. Additionally, Congress is debating tax cuts and other measures that might increase the national debt, further influencing inflation and potentially leading to higher interest rates.
According to Barclays strategists, signs of market euphoria are emerging, reminiscent of the “meme stock” craze and the dot-com bubble.
“Market bubbles are infamously difficult to predict and can endure far longer than anticipated before correcting,”
noted Barclays strategists Stefano Pascale and Anshul Gupta.
Bond Market and Federal Reserve Actions
In the bond market, Treasury yields rose following mixed economic reports. A report indicated an increase in job openings, suggesting a potentially strengthening job market. However, manufacturing data presented a mixed picture, with some reports indicating growth and others noting continued contraction.
The yield on the 10-year Treasury increased to 4.27% from 4.24%, while the two-year Treasury yield, closely linked to Federal Reserve rate expectations, rose to 3.78% from 3.72%. This economic data could provide the Federal Reserve with reasons to maintain its current pause on interest rate cuts, despite Trump’s calls for more aggressive rate reductions.
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 complex dynamics, investors remain vigilant, balancing optimism with caution amid potential economic shifts and geopolitical tensions.
