The S&P 500 and the Nasdaq closed down on Monday, dragged by declines in the megacap technology stocks including Alphabet, while investors assessed developments in U.S.-Iran negotiations.
The Dow closed higher, boosted by the health care and industrial sectors. Canada’s main stock index also rose, led by metal mining shares, as investors also assessed hotter-than-expected domestic inflation data.
SpaceX tumbled 16.4%, its biggest single-day drop, and weighed heavily on the Nasdaq Composite. It is still trading above its IPO price of $135 per share. The Elon Musk-led company launched its first-ever debt offering on Monday and said it had about US$100.8 billion in cash and cash equivalents as of June 19.
Optimism about artificial intelligence has supported Wall Street’s recent rally, but analysts noted that more investors have been questioning lofty spending on infrastructure expansion by hyperscalers. Alphabet fell 5% while Meta, Amazon and Microsoft fell between 2.3% and 4.7%.
“This is a very sentiment-driven sector and the group tends to trade together on a day-to-day basis,” said Bill Northey, senior investment director at US Bank. “But as we step back ... some of the strongest fundamentals are within the AI data center buildout space. That includes both the hyperscalers as well as many of the components that go into that continued buildout.”
The next test for the rally will be Micron Technology’s quarterly results on Wednesday. Shares of the memory chipmaker are up nearly 300% this year.
Seven of the 11 major S&P sectors closed higher, led by real estate and energy stocks. Communication Services was a laggard, falling 3.8%.
The Dow Jones Industrial Average rose 148.01 points, or 0.29%, to 51,712.71, the S&P 500 lost 27.79 points, or 0.37%, to 7,472.79 and the Nasdaq Composite lost 351.33 points, or 1.32%, to 26,166.60.
Oil prices fell as Washington and Tehran agreed on a roadmap toward a final deal within 60 days. U.S. and Iranian officials made “great progress” at the first round of their talks in Switzerland that ended early on Monday, mediators said, although tensions persisted over Lebanon and the Strait of Hormuz.
“Energy prices are coming down, which is certainly a catalyst for both the consumer as well as businesses,” Northey said. “On the flip side of that, we came out with a very hawkish (Federal Reserve) under new Chair Kevin Warsh, and it led the market to believe that there will be a more prioritized focus on returning to price stability in the near term.”
This view on the Fed has lifted U.S. Treasury yields and pressured stock prices lower, he said. A focus this week will be on Thursday’s U.S. Personal Consumption Expenditures (PCE) data, the Fed’s preferred gauge of core inflation. A stronger-than-expected reading could reinforce expectations of a hawkish Federal Reserve, after Warsh underscored the need to curb inflation at last week’s meeting.
Markets currently expect a 25-basis-point rate hike from the Fed in September, according to LSEG data.
The Toronto Stock Exchange’s S&P/TSX Composite Index ended up 144.84 points, or 0.4%, at 35,002.18 after three straight days of declines.
Canada’s annual inflation rate in May accelerated to 3.2%, a 29-month high. That was above the 3% rate economists had forecast but measures of underlying inflation closely followed by the Bank of Canada were more muted.
The materials group, which includes metal mining shares, rose 1.4% as gold rebounded from its lowest level in more than a week. Shares of Wheaton Precious Metals Corp added 4.7%.
The price of oil settled 2.3% lower at $74.82 a barrel. Still, energy clawed back some recent declines for a second straight day on the TSX, adding 1.1%.
Industrials in Toronto rose 0.2% and heavily weighted financials ended 0.3% higher.
Five of 10 major sectors ended lower on Monday, including technology and consumer discretionary, which lost 0.6% and 0.8% respectively.
Among other movers on Wall Street, Apogee Therapeutics jumped 46.7% after AbbVie said it would acquire the biotech company for US$10.9 billion in cash. AbbVie rose 6.2%.
Declining issues outnumbered advancers by a 1.32-to-1 ratio on the NYSE. There were 345 new highs and 200 new lows on the NYSE. On the Nasdaq, 2,078 stocks rose and 2,773 fell as declining issues outnumbered advancers by a 1.33-to-1 ratio. The S&P 500 posted 29 new 52-week highs and 33 new lows while the Nasdaq Composite recorded 144 new highs and 186 new lows. Volume on U.S. exchanges was 22.97 billion shares, compared with the 22.12 billion average for the full session over the last 20 trading days.
Reuters, Globe staff