U.S. equities moved higher on Tuesday, with the tech-heavy Nasdaq Composite (INDEXNASDAQ:IXIC) taking the lead as the second quarter drew to a close. However, beneath the surface, market breadth remained weak, as more stocks declined than advanced despite the positive headline numbers.
As of late morning trading, the Dow Jones Industrial Average (INDEXDJX:.DJI) was little changed at 52,186.46. The S&P 500 (INDEXSP:.INX) added 0.34% to 7,465.39, while the Nasdaq advanced 0.76% to 26,011.87. Decliners outpaced advancers on the NYSE by a ratio of 1.33-to-1, and on the Nasdaq by 1.29-to-1. Seven of the 11 S&P 500 sectors were trading lower, underscoring the narrow leadership.
“Investors can’t see an end in sight to this bull run,” commented David Morrison, senior market analyst at Trade Nation. Brian Levitt, chief global market strategist at Invesco, noted that tech experienced a “period of June gloom” that may reverse as earnings season approaches.
Market Breadth and Sector Divergence
The divergence between the major indices and the broader market was highlighted by the performance of key ETFs. The SPDR S&P 500 ETF Trust (NYSEARCA:SPY) rose 0.42% to $744.09, while the Invesco QQQ Trust (NASDAQ:QQQ) gained 1.11% to $732.12. In contrast, the SPDR Dow Jones Industrial Average ETF Trust (NYSEARCA:DIA) edged up just 0.12% to $522.32, and the iShares Russell 2000 ETF (NYSEARCA:IWM) added only 0.12% to $299.34, reflecting the lag in small-cap and value stocks.
Mega-cap growth names drove the Nasdaq’s advance. Nvidia (NASDAQ:NVDA) rose 1.21% to $197.32, Apple (NASDAQ:AAPL) gained 1.40% to $285.69, Microsoft (NASDAQ:MSFT) added 1.04% to $372.39, and Tesla (NASDAQ:TSLA) climbed 0.63% to $414.45. On the downside, freight and consumer stocks weakened. FedEx (NYSE:FDX) fell 4.09% to $312.08, and Nike (NYSE:NKE) dropped 0.82% to $41.14.
Mixed Economic Signals
Economic data released Tuesday painted a mixed picture. Job openings in the U.S. edged up by 9,000 to 7.594 million in May, but hiring decreased by 45,000 to 5.170 million. Openings in transportation, warehousing, and utilities declined by 43,000, a detail that weighed on sentiment following FedEx’s results.
Consumer confidence data from the Conference Board showed a modest uptick, with the index rising 0.6 point to 91.2 in June. However, the present-situation measure slipped, and the share of respondents reporting that jobs were hard to get climbed to 22.5%, the highest since January 2021. “Consumer confidence inched up in June,” said Dana M. Peterson, chief economist at the Conference Board, attributing the move to lower oil prices, though she noted that views on the labor market “softened measurably.”
AI Spending and Earnings Outlook
Artificial intelligence spending continues to be a key driver for the market. Microsoft, Alphabet (NASDAQ:GOOGL), Amazon (NASDAQ:AMZN), and two other companies are guiding for a combined $730 billion in total capital expenditures this year, according to JPMorgan Chase (NYSE:JPM) data cited by Reuters. “It is certainly priced in,” said Nicolas Janvier at Columbia Threadneedle. David Bianco, Americas CIO at DWS, called earnings “the main test” for the rally.
Valuation concerns remain present. BofA’s Bubble Risk Indicator stood at 0.91 for the PHLX Semiconductor Sector and 0.82 for the Technology Select Sector. The S&P 500 was trading at a price-to-sales ratio of 3.22, well above its long-term average of 1.84, according to LSEG. “Risk measures were flashing amber,” said Oliver Shale, investment specialist U.S. at Ruffer.
Market Context and Upcoming Data
The rally comes after a strong quarter. On Monday, stocks surged, with the Dow closing at a record high. The S&P 500 gained 1.18% and the Nasdaq jumped 2.07% as tech names rebounded from recent losses. Both the S&P 500 and Nasdaq are on pace for their best quarter in six years, while the Dow aims for its top quarter since 2022.
Looking ahead, the June employment report is scheduled for release on Thursday. Economists surveyed by Reuters expect 110,000 new jobs and the unemployment rate to hold at 4.3%. The next full market holiday is July 3, when the NYSE will close for Independence Day.
