Stock market today: Nasdaq trims losses as chip stocks sell off, S&P 500 and Dow rise
Key Takeaways
- •Chip stocks fell as investors grew more cautious about circular financing concerns tied to AI spending and Nvidia's reported talks involving OpenAI.
- •The Nasdaq Composite slipped 0.1%, while the S&P 500 rose 0.3% and the Dow Jones Industrial Average gained 1%.
- •Coca-Cola raised its full-year forecast after beating second-quarter earnings expectations, and more reports are due from Visa, Boeing, Ford, PayPal and SK Hynix.
- •Oil prices declined after the United States and Iran stopped active fighting and President Trump said diplomatic talks were underway.
- •US consumer confidence fell in July to 90.8 as views of the labor market weakened, ahead of the Federal Reserve's policy decision on Wednesday.
US tech stocks diverged on Tuesday as a sell-off in chip stocks underscored concerns about AI circular financing deals, offsetting lower oil prices and optimism around corporate earnings.
The Nasdaq Composite (^IXIC) pared earlier losses to fall 0.1%. The S&P 500 (^GSPC) rose 0.3%, while the Dow Jones Industrial Average (^DJI) gained 1% as investors weighed the latest round of quarterly results and the broader market shifted toward sectors seen as less exposed to the AI trade.
Sentiment around the AI trade has weakened amid reports that Nvidia (NVDA) is exploring a $250 billion funding backstop for OpenAI (OPAI.PVT), further linking the two companies and heightening concerns about circular financing. Tech traders have also become more cautious that Chinese competition is narrowing the AI gap with US companies, adding to doubts about the pace of potential returns. For investors, the pullback in chip names shows how closely the market is watching whether enthusiasm for AI spending can keep pace with the financing structures behind it.
The earnings flood continues, with major names including Visa (V), Boeing (BA), Ford (F), and PayPal (PYPL) due to report. Coca-Cola (KO) raised its full-year outlook after posting a second-quarter earnings beat. Investors will also be watching SK Hynix's results, due around 8 p.m. ET, for clues on the memory trade as AI concerns continue to build.
Oil prices continued to fall after the US and Iran halted active fighting and President Trump said the two sides were in diplomatic talks. "There's a good chance that something could happen, and if it does, good," Trump said aboard Air Force One on Monday. "If it doesn't, we go back to doing what we were doing."
The Federal Reserve began its two-day policy meeting on Tuesday, setting up one of the market's most difficult policy calls in years. Traders are leaning toward the Fed leaving rates unchanged when the meeting ends on Wednesday, but confidence is limited and a rate hike remains possible. That makes the meeting a key backdrop for equities already balancing softer energy costs, weakening consumer sentiment, and a market still sensitive to the outlook for growth and profits.
Separately, US consumer confidence edged lower in July to 90.8, according to the Conference Board, as perceptions of the labor market weakened.