Stocks slipped as chipmakers led tech lower: Tuesday recap

Wall Street fell for a third straight session on Tuesday, and this time the selling zeroed in on technology. The S&P 500 lost 0.7% to 7,691.76. The Nasdaq Composite dropped 1.7% to 26,289.71, while the Dow Jones Industrial Average eased just 0.2%, to 53,343.40. The split was the story. Investors pulled money out of the chip and megacap names that have carried the market higher this year and rotated toward energy and defensive corners that had lagged.

The sector map divided cleanly. Technology was the weakest group, down 2.5%, with semiconductors bearing the brunt of the retreat. Energy ran the other way, up 1.8% and the standout gain on an otherwise red day. Health care rose 1.6% and consumer staples added 1.1%, the sort of steady, defensive corners that tend to draw buyers when growth stocks wobble. Financials edged up 0.5%. Industrials slid 1.5% and materials fell 0.9%, tracking the broader pullback. Four of the eleven S&P sectors finished higher.

Rising bond yields set off the tech selling. The 10-year Treasury yield climbed to 4.68%, and higher yields press hardest on fast-growing companies whose value rests on profits years into the future. When the return on safe government debt rises, those distant earnings look less attractive today. Chipmakers gave back the most. They had led the market’s advance for months, on the strength of demand for artificial-intelligence hardware, and Tuesday extended a stretch of pressure on the group.

Two other threads ran through the day. Crude oil pushed higher as hopes for an easing of tensions in the Middle East dimmed, extending a standoff that has kept prices elevated for months and, with them, the shares of energy producers. Home Depot offered a brighter note. The home-improvement retailer, a member of the Dow, reported fiscal second-quarter sales of $47.9 billion, up 5.7% from a year earlier, topped Wall Street’s profit estimate and reaffirmed its full-year sales guidance. The blue-chip average carries far less technology weight than the Nasdaq, which helps explain why it held up while growth names sank.

Breadth leaned negative. The small-cap Russell 2000, tracked by the IWM fund, fell 1.3%, a steeper drop than the large-cap gauges and a sign the selling reached down the size ladder. The Cboe Volatility Index rose to 15.84, higher on the day but still low by historical standards. The reaction stayed orderly. Seven of the eleven sectors closed lower, yet no major index shed more than two percent, and the pullback looked more like a shift in leadership than a scramble for the exits.

The week stays busy. More of the country’s largest retailers report over the next two days, and minutes from the Federal Reserve’s latest policy meeting are due Wednesday. Traders will read the retail results for a fresh gauge of household spending and parse the minutes for the tenor of the rate debate, while keeping an eye on the direction of oil and the climb in yields.

This is a general-market summary for information only — not investment advice, and not a recommendation regarding any security.