Stocks erased earlier gains on Tuesday as a rally in the technology sector fizzled out.
The Nasdaq Composite traded 0.1% lower, erasing a surge of more than 1%. The Dow Jones Industrial Average was down 2 points after rallying more than 150 points while the S&P 500 traded just below breakeven.
The S&P 500 technology sector was down 0.3%, giving back a gain of 1.1%. Advanced Micro Devices and Symantec led tech’s decline, sliding more than 3% each.
The Dow was on pace to snap a six-day winning streak. However, the S&P 500 traded about 2.4% below an all-time high set in April.
“At this point, a failure to break out to new highs would be viewed as negative. The month is only a week and a half old, but we’ve got a head of steam now. We’re seeing evidence of more individual stocks in the S&P 500 making new highs. There’s a bit of an expectations the S&P 500 might be able to test those levels we saw in April,” said Willie Delwiche, investment strategist at Baird.
“The potential headwind to that is what happens with sentiment. Sentiment turned so negative in May and now, as stock rebound in June, we’re seeing pessimism being replaced with optimism. If it comes in too fast, that can shift from being a tailwind for stocks to a headwind,” Delwiche said.
Stocks jumped to start the day as a resolution between Mexico and the U.S. to avoid tariffs and hopes of lower interest rates from the Federal Reserve lifted investor sentiment.
President Donald Trump said Sunday that a 5% levy all Mexican imports into the U.S. would be suspended indefinitely. He added he had “full confidence” in Mexico’s ability to crack down on immigration from Central America.
Global stocks rose after Chinese state news agency Xinhua said the country would let local governments use bonds to finance infrastructure projects. The Shanghai Composite jumped 2.6% overnight, while the Stoxx 600 index in Europe gained 1%.
Market expectations for lower rates by July sat around 78%, according to the CME Group’s FedWatch tool. Investors are also pricing in a 97.1% chance of lower rates by December, according to FedWatch.
These forecasts have been rising amid weakening U.S. economic data. Monthly jobs growth slowed to 75,000 in May, missing an estimate of 180,000. Meanwhile, manufacturing activity in the U.S. grew at its slowest pace since 2016.
“The pendulum has swung significantly in the other direction,” said Art Hogan, chief market strategist at National Securities. “We spent six weeks grinding lower and now we’re spending seven days popping higher.”
“It feels like we went from despair to exuberance in too short of a period of time without much changing in terms of facts. I’d like to see some stabilization here,” he said.
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