U.S. index ETFs saw mixed results in after-hours trading Monday, reflecting the broader market's cautious tone. The Invesco QQQ Trust slipped 0.28%, while the SPDR S&P 500 ETF dipped 0.11% just before 8 p.m. New York time. In contrast, the Dow ETF DIA inched up 0.02%, maintaining the pattern from the regular session where blue-chip stocks outperformed growth names.
During the regular session, the Dow Jones Industrial Average managed a modest gain of 148.01 points, or 0.29%, closing at 51,712.71. The S&P 500, however, fell 27.79 points, or 0.37%, to end at 7,472.79. The tech-heavy Nasdaq Composite took the hardest hit, dropping 351.33 points, or 1.32%, to finish at 26,166.60. Traders showed little appetite for technology stocks in the cash session, reflecting ongoing concerns about the sector's valuation and spending.
AI Stocks Under Pressure
Artificial intelligence stocks were back in the spotlight, but the trade is showing signs of strain. Investors have bid up AI plays for most of the year, but Monday's decline suggests a pullback from names with the heaviest AI infrastructure spending, particularly cloud hyperscalers that operate massive data centers for rent.
Alphabet, Amazon, Meta, and Microsoft all declined as the market expressed nervousness about large AI capital expenditure budgets. "Broader sector pullback," said David Wagner, head of equity and portfolio manager at Aptus Capital Advisors, linking the move to worries over AI capital outlays. Alphabet slid 5%, while SpaceX plunged 16.4%, its worst single-day loss after the Elon Musk-led group issued its first debt sale and reported about $100.8 billion in cash and cash equivalents as of June 19.
Tech stocks remain "very sentiment-driven," noted Bill Northey, senior investment director at U.S. Bank, though he acknowledged some strength in the AI data center space. The departure of John Jumper, a top Google DeepMind scientist and Nobel winner, to AI startup Anthropic added to concerns about talent retention in the AI sector, affecting chip and memory suppliers as well.
Chip Stocks Show Divergence
Semiconductor stocks did not move in unison during the after-hours selloff. Micron climbed both after the bell and during regular trading following a new deal with Anthropic. Storage stocks like SanDisk and Western Digital, which have benefited from AI trades this year, also stood out. This divergence suggests some investors continue to buy firms securing AI contracts while selling those that are heavy spenders.
Sectors outside technology held up better than the Nasdaq numbers indicated. Real estate and energy led gains, with seven out of the 11 main S&P 500 sectors finishing higher. Communication services slipped, while the Russell 2000 index of small-cap stocks climbed 0.83%. Sellers appeared to focus on specific areas rather than the entire market.
Oil and Treasury Yields
Oil prices provided some support to certain stocks, though not enough to lift the Nasdaq. Brent crude fell 3.38%, settling at $77.90 a barrel. Traders pointed to relief on supply as U.S.-Iran talks progressed. The 10-year Treasury yield rose 5.78 basis points to 4.509%. Gerry Sparrow, chief investment officer at Sparrow Capital Management, noted that markets are looking for the new Federal Reserve head to be "a little easier on rates."
Fed Policy and Inflation Data
Federal Reserve policy remains a major concern. Chicago Fed President Austan Goolsbee said Monday that inflation continues to move "the wrong way." Consumer prices rose 4.2% in May, and the Fed's preferred inflation gauge, the PCE price index, climbed 3.8% in April. The PCE data, due Thursday, is the key risk to watch. A hotter-than-expected print could increase rate-hike bets, push Treasury yields higher, and put further pressure on expensive AI stocks.
Additionally, a breakdown in U.S.-Iran talks could send oil prices higher, reversing the recent dip in energy costs just as investors weigh whether the tech selloff is a temporary blip or the start of a longer-term pullback.
Market Outlook
Market focus this week is on Micron's earnings, due Wednesday, and the PCE inflation data set for Thursday. In after-hours trading, Nasdaq 100 futures slipped 0.25%, S&P 500 futures edged down 0.13%, while Dow futures ticked up 0.04% as of 7:09 p.m. There is no panic yet, but the tone is cautious with little sign of dip-buying activity.
