TLDR
- The Nasdaq pared losses to finish nearly flat, while the Dow rose 1% and the S&P 500 gained 0.3% on Tuesday.
- Chip stocks sold off after a ~10% drop in South Korea’s KOSPI index, dragging semiconductors lower on AI valuation concerns.
- Nvidia fell nearly 5% on reports it may back a $250 billion funding deal for OpenAI, raising circular financing worries.
- The Fed kicks off its two-day meeting Tuesday, with traders pricing in a 31.5% chance of a surprise rate hike Wednesday.
- Coca-Cola jumped 6.56% after raising its full-year outlook following a Q2 earnings beat.
The Nasdaq Composite finished nearly flat on Tuesday, recovering from an earlier slide as chip stocks sold off globally. The Dow Jones Industrial Average gained around 1%, and the S&P 500 rose roughly 0.3%.
The session was shaped by a sharp drop in Asian semiconductor stocks. South Korea’s KOSPI index fell around 10%, sending ripples through US chip names. The iShares Semiconductor ETF dropped again, extending Monday’s losses.
“A heavy selloff in Asian chipmakers is dragging broader equity markets lower amid valuation and capex worries,” said Tom Essaye of Sevens Research. “Focus is likely on whether the pre-market selloff in tech stocks accelerates or stabilizes.”
Nvidia ($NVDA) was the headline mover, falling close to 5%. Reports emerged that the company is exploring a $250 billion funding backstop for OpenAI, deepening the financial ties between the two. That raised questions about circular financing in the AI ecosystem.
Traders are also growing cautious about Chinese AI competition narrowing the gap with US firms, putting pressure on the broader AI trade.
Fed Meeting in Focus
The Federal Open Market Committee began its two-day policy meeting on Tuesday. The decision on Wednesday is one of the trickiest calls in years. Traders currently put a 31.5% chance on a surprise rate hike, according to CME FedWatch data.
There’s no clear consensus on which way the Fed goes. A hold remains the base case, but a hike is firmly on the table.
US consumer confidence slipped to 90.8 in July, according to the Conference Board. Perceptions of the labor market softened, adding another data point for the Fed to weigh.
Earnings Continue
Coca-Cola ($KO) was the standout earnings winner on Tuesday, jumping 6.56% after raising its full-year outlook on the back of a Q2 beat.
Other big names reporting Tuesday included Visa (V),Boeing(V), Boeing ( BA), Ford (F),andPayPal(F), and PayPal ( PYPL). Investors were also watching SK Hynix results due around 8 p.m. ET for clues on the memory chip trade.
Oil prices continued to fall after the US and Iran paused active military hostilities. President Trump said diplomatic talks were underway, though the outcome remained unclear.
The S&P 500 has now posted back-to-back small gains, though the index gave up most of an early 1% advance on Monday, continuing a recent pattern of weak intraday follow-through, according to CappThesis founder Frank Cappelleri.
At the close, the Dow sat at 52,863, the S&P 500 at 7,444, and the Nasdaq at 24,956.
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