More drops for Big Tech stocks are keeping U.S. stock indexes in check on Tuesday.
The S&P 500 was down 0.5% in midday trading, even though the majority of stocks within it were rising. The Dow Jones Industrial Average was up 62 points, or 0.2%, as of 11:30 a.m. Eastern time, and the Nasdaq composite was down 0.9%.
PayPal rose 6.7% to help lead the market after topping analysts’ expectations for profit during the spring. It also raised its forecast for profit over the full year.
JetBlue Airways climbed 17.9% after reporting a profit for the spring when analysts were expecting to see a loss. The airline also outlined ways it hopes to improve on-time performance and attract customers.
But a 1% slide for Microsoft nevertheless helped drag the S&P 500 lower as investors wait for its latest profit report, which will arrive after trading finishes for the day. Five of the other six stocks in the group that’s come to be known as the “Magnificent Seven” also fell, including a 5% tumble for Nvidia.
This handful of Big Tech stocks had driven the S&P 500 to dozens of records this year, in part on investors’ frenzy around artificial intelligence technology. But they ran out of momentum this month amid criticism they had grown too expensive and expectations had run too high.
Last week, investors found profit reports from Tesla and Alphabet underwhelming, which raised concerns that other “Magnificent Seven” stocks could also fail to impress. Amazon, Apple and Meta Platforms will also be reporting their latest profit results in coming days. How they perform carries extra weight on the S&P 500 because they’re among the largest by value.
Helpfully for the market, other stocks have been rising up to cushion some of Big Tech’s recent softness, including smaller stocks and companies whose profits are closely tied to the strength of the economy. They rallied on hopes that inflation is slowing enough to get the Federal Reserve to soon begin cutting interest rates.
The Russell 2000 index of smaller stocks rose 0.2% Tuesday.
No one expects the Fed to cut interest rates this week when it announces its decisions on Wednesday. But the widespread expectation is that it will do so at its next meeting in September.
The Fed raised interest rates 11 times beginning in March 2022 in a bid to tame the inflation that took root as the economy rebounded from the recession caused by the pandemic. Fed officials haven’t touched their benchmark rate, which is at a more than two-decade high, in roughly a year.
Expectations for a soon-to-be easier Fed have sent yields tumbling in the bond market, and they were relatively steady Tuesday. The yield on the 10-year Treasury was at 4.17%, where it was late Monday and down from 4.70% in April.
Yields got a slight bump in the morning after a couple reports on the economy came in stronger than expected. One showed U.S. employers were advertising slightly more job openings at the end of June than economists expected. That’s a good signal for workers, but too much strength could put upward pressure on inflation.
A second report, meanwhile, said confidence among U.S. consumers is improving by more than economists expected. There, too, the hope is for a “Goldilocks” type of reading that’s neither so hot that it raises fears about reaccelerating inflation nor so cold that it warns of a possible recession.
Also helping to weigh on Wall Street Tuesday was Merck, which fell 9.7% despite reporting stronger results for the last quarter than expected. It gave a forecast for profit this year that fell short of analysts’ expectations, partly because of costs related to its buyout of Eyebiotech.
Procter & Gamble slid 5.8% after beating forecasts for profit in the latest quarter but falling short on revenue. It was hurt by the effects of shifting foreign exchange rates on its international sales, and it expects that to remain a challenge in its upcoming fiscal year.
In stock markets abroad, indexes were mixed across Asia and Europe ahead of decisions by central banks there that could shake things up.
Japan’s Nikkei 225 added 0.1% ahead of a meeting by the Bank of Japan, where the expectation is for an increase in interest rates.
The FTSE 100 in London slipped 0.1% ahead of a decision by the Bank of England that could feature a cut in rates.
Indexes were stronger in continental Europe after a report indicated that economic growth was a touch stronger than expected in the second quarter among the 20 countries that use the euro currency, according to official figures released Tuesday by European Union statistics agency Eurostat.
