Major U.S. stock indexes closed lower on Tuesday, pulling back from record highs after Federal Reserve Chair Jerome Powell delivered cautious remarks about the economy and asset valuations. The decline was led by the technology sector, with significant drops in major names like Nvidia and Oracle.
The S&P 500 fell 0.6%, the tech-heavy Nasdaq Composite dropped 1%, and the Dow Jones Industrial Average finished the day down 0.2%. The session's downturn followed a period of strong performance, where all three indexes had reached new closing and intraday records in the preceding three trading days.
Key Takeaways
- Major U.S. stock indexes (Dow, S&P 500, Nasdaq) closed lower after reaching record highs.
- Fed Chair Jerome Powell stated that stocks were "fairly highly valued" and acknowledged the challenges of managing inflation and employment.
- The technology sector led the market's decline, with Nvidia shares falling nearly 3% after recent gains.
- Micron Technology reported strong earnings after the bell, driven by demand for AI hardware, causing its stock to rise in after-hours trading.
- Energy stocks performed well, with Halliburton leading the S&P 500, as crude oil prices increased.
Powell's Comments Introduce Market Uncertainty
The market's shift in momentum came after Federal Reserve Chair Jerome Powell spoke at the Greater Providence Chamber of Commerce in Rhode Island. His comments, the first since the central bank's interest rate cut last week, appeared to temper investor optimism.
Powell noted that U.S. stocks were "fairly highly valued," a statement that likely contributed to the sell-off. He also addressed the central bank's difficult position in navigating its dual mandate of maintaining price stability and achieving maximum employment.
"There is no risk-free path," Powell said, highlighting the challenge when the two goals of fighting inflation and supporting the job market suggest different policy actions. He explained, "It's a very difficult policy environment when your two goals are telling you two different things, you've got to make a compromise."
The Fed Chair gave no clear indication of future rate cuts, stating that the central bank's strategy would depend on incoming economic data in the months ahead. This lack of forward guidance added a layer of uncertainty for investors.
The Fed's Balancing Act
The Federal Reserve's dual mandate requires it to balance two primary economic goals: stable prices (typically a 2% inflation rate) and maximum employment. When inflation is high, the Fed usually raises interest rates to cool the economy. When unemployment rises, it typically lowers rates to stimulate economic activity. Powell's remarks underscore the current dilemma where these two objectives are in conflict.
Technology and Corporate Movers
The technology sector was the primary driver of Tuesday's market decline. Several high-profile companies saw their shares fall, reversing some of the recent strong gains that had pushed the market to new heights.
Major Tech Stocks Under Pressure
Nvidia (NVDA) shares dropped nearly 3%, giving back a significant portion of the 4% gain from the previous session. The prior day's rally was fueled by news of a partnership with OpenAI to build out data centers, a deal potentially involving a $100 billion investment from the chipmaker.
Oracle (ORCL) was another notable decliner, with its stock falling more than 4%. This came a day after the company's shares had jumped 6% following the announcement of new co-CEOs to advance its artificial intelligence strategy.
Amazon (AMZN) was the worst-performing stock in the Dow Jones Industrial Average, closing down 3%. The e-commerce giant is currently involved in a legal battle with the Federal Trade Commission over allegations related to its Prime membership cancellation process.
After the market closed, Micron Technology (MU) reported impressive fiscal fourth-quarter results. Revenue jumped 46% year-over-year to a record $11.32 billion, beating analyst estimates. The company's stock rose nearly 3% in extended trading on the news and its positive outlook for the next quarter.
Sector Performance and Individual Stock Stories
While technology stocks struggled, other sectors and individual companies had more positive sessions. The energy sector was a standout performer, while specific corporate news drove significant price movements in several stocks.
Advancers and Decliners
A number of companies saw their stock prices move based on company-specific news:
- Boeing (BA): Shares advanced 2% after the aerospace company secured a major contract with Uzbekistan Airways for up to 22 of its 787 Dreamliner aircraft. President Donald Trump highlighted the deal as being worth over $8 billion.
- Kenvue (KVUE): The consumer health company's stock rose 1.6%, recovering from a 7.5% drop on Monday. The earlier decline was in anticipation of comments from President Trump regarding Tylenol's main ingredient, acetaminophen. The administration's subsequent statement was viewed by investors as less severe than feared.
- Halliburton (HAL): The oilfield services company was the top performer in the S&P 500, with its shares rising 7.3%. The energy sector broadly benefited from a 2.3% increase in West Texas Intermediate crude oil prices, which reached $63.70 per barrel.
- Generac Holdings (GNRC): In contrast, the power generator supplier was the S&P 500's biggest loser, with its stock plummeting more than 10%. Analysts noted headwinds in the market for home standby generators despite opportunities in the data center market.
Broader Market and Economic Indicators
Beyond equities, other financial markets also reacted to the day's events. The 10-year Treasury yield, a key benchmark for borrowing costs, decreased to 4.11% from 4.15%.
In commodities, gold futures continued their upward trend, rising 0.6% to a new record high of approximately $3,800 per ounce. Meanwhile, Bitcoin saw a slight decline, trading around $111,700.
Earlier in the day, the Organisation for Economic Co-operation and Development (OECD) released an updated economic outlook. The organization raised its 2025 U.S. GDP growth forecast to 1.8%, citing strong investment related to artificial intelligence. However, it projected a slowdown to 1.5% growth in 2026, pointing to the impact of tariffs and reduced net immigration.
