After rallying sharply on Monday on optimism about a US-Iran peace deal, investors in the S&P 500 and Nasdaq took a breather even as oil prices fell to their lowest levels since early March.
Shares of SpaceX finished up 4.8 percent at US$201.80, after hitting a record high of US$225.64. The rocket and AI company ended the session with a market value above that of Amazon and briefly surpassed Microsoft’s value in morning trading.
While falling oil prices offered some support to equities, Mark Luschini, chief investment strategist at Janney Montgomery Scott in Philadelphia, said it was too difficult to build on recent steep gains in the heavyweight technology sector without a break.
He noted some investor caution ahead of the US Federal Reserve’s policy update due on Wednesday afternoon.
“We had a big move yesterday in the market,” said Luschini, alluding to the S&P 500’s 1.65 percent rally on Monday and the Nasdaq’s advance of more than 3 percent.
“We’re just digesting some of those gains and the setup in anticipation of the Fed meeting is always a little tentative.”
The Nasdaq fell 1.2 percent, to 26,376, the S&P 500 fell 0.6 percent, to 7,511, while the Dow rose 0.6 percent, to 51,999.
Investors rotated into economically sensitive sectors and sold richly valued technology stocks on Tuesday. Chip stocks fell sharply after soaring in the prior three sessions.
US oil futures settled down 5.8 percent as some details emerged about the US-Iran interim deal, which is expected to extend a tenuous ceasefire announced in April by another 60 days and reopen the Strait of Hormuz, which Iran has effectively blocked since the US and Israel attacked Iran in February.
US President Donald Trump said the agreement would rule out a nuclear weapon for Tehran, while a US official said that it allows Iran to sell oil upon signing.
The war had pushed up oil prices since it started in late February, and fanned worries about sticky inflation, which informs the US central bank’s policy on interest rates.
Investors are widely expecting the Fed to hold interest rates at its current 3.50 percent to 3.75 percent range on Wednesday, though they will pay close attention to new Fed Chairman Kevin Warsh’s comments on inflation, unemployment and the economic outlook.
Traders see the Fed holding rates through much of the year but are betting on a nearly 43 percent chance of a 25-basis-point rate hike in December, according to CME Group’s FedWatch tool. (Reuters)
