Nasdaq, S&P 500 close lower, weighed by tech stocks, Dow ends up

The Nasdaq and the S&P 500 closed lower on Tuesday, dragged down by weakness in large-cap tech stocks, while the Dow ended higher in a volatile day marked by seasonally low liquidity.

Investors navigated a choppy session, between optimism over stimulus and caution around market concentration around a few tech stocks.

A sell-off of a few megacap tech and tech-adjacent momentum stocks, that had especially high gains in recent weeks, left markets vulnerable to sharp swings. The NYFANG index, which tracks 10 heavily traded tech names, fell 1.8%.

"We got to very overbought levels on tech and Nasdaq over the past weeks," said Farz Azarm, managing director of Equities trading with Mizuho Americas. "Today you are seeing a massive unwind" of this movement, he said.

Dow Jones Industrial Average rose 400.17 points, or 0.91%, to 44,494.94. The S&P 500 lost 6.94 points, or 0.11%, to 6,198.01 and the Nasdaq Composite lost 166.84 points, or 0.82%, to 20,202.89.

News from Washington helped fuel optimism. U.S. President Donald Trump said he was not thinking of extending the July 9 deadline for countries to negotiate trade deals with the U.S., easing investor concerns about prolonged uncertainty. The Senate's passage of Trump's tax package had investors weighing the bill's stimulative effects against its multi-trillion dollar cost.

Tesla shares were hit by a renewed spat between CEO Elon Musk and Trump, while economic data backed the U.S. central bank's patient stance on rate cuts.

Tesla dropped 5.4% after Trump threatened to cut off the billions of dollars in subsidies that Musk's companies get from the federal government. Musk had revived his criticism of Trump's wide-ranging tax cut and spending bill.

The blue-chip Dow got a boost from economically sensitive sectors such as materials and smallcaps, which outperformed. The Dow Transportation index, widely considered an economic barometer, jumped 2.9%, its biggest one-day gain since May 12.

"The markets are preparing for a boatload of stimulus with an already healthy economy," said Rich Bernstein, CEO of Richard Bernstein Advisors. "But we are still in a very speculative market."

Data showed U.S. job openings increased unexpectedly in May, suggesting labor market resilience despite trade and economic uncertainties. U.S. Treasuries fell in response, pushing the 2-year yield to a near one-week high. Earlier in the day, Federal Reserve Chair Jerome Powell reiterated the U.S. central bank plans to "wait and learn more" about the impact of tariffs on inflation before lowering rates, again setting aside Trump's demands for immediate and deep rate cuts. The Institute for Supply Management (ISM) said its manufacturing PMI nudged up to 49.0 last month from a six-month low of 48.5 in May, slightly above economists' forecast of 48.8.

Market focus now shifts to Thursday's nonfarm payrolls report, which could help recalibrate bets for a rate cut as soon as July.

Money markets are pricing in a 21.2% likelihood for a July rate cut and see about 64 basis points worth of cuts by the end of this year, per LSEG data. Shares of U.S.-based casino operators rose after Macau reported a rise in June gambling revenue. Wynn Resorts, Las Vegas Sands and MGM Resorts International added more than 7% each.