The S&P 500 recovered most of its losses Tuesday, as big tech cut losses to ease pressure on the broader market following a slump in economically-sensitive stocks amid fears the reopening-led boost to the economy is running out of steam.
The S&P 500 fell 0.2%, but had been down nearly 0.9% at the lows of the day. The Dow Jones Industrial Average slipped 0.6%, or 208 points, the Nasdaq was up 0.17%.
Services activity, accounting for nearly 80% of U.S. private-sector gross domestic product, slipped more than expected, stoking fears that the pace of the economic recovery is running out of steam.
The June headline ISM Services PMI slipped to 60.1 from 64.0 the previous month. Economists expected a narrower decline to a reading of 63.5.
"The reopening of the service sector across the country continues to support strong readings in these diffusion indexes. However, momentum has faded somewhat in the states that reopened the earliest," Jefferies (NYSE:JEF) said in a note.
U.S. bond yields fell sharply across the yield curve. The benchmark 10-year yield fell to its lowest level since February and faces a key test ahead that could spell trouble for the sectors of the market that move in tandem with the economy like cyclicals, but may also boost growth sectors like tech.
"If the TNX does in fact continue to press lower toward this 200-day in sessions ahead, then we would fully expect the reflationary themes noted above to continue to underperform on a relative basis (so watch tech / large-caps to continue dominating)," according to Mark Luschini, Chief Investment Strategy at Janney Montgomery Scott.
Wells Fargo (NYSE:WFC), however, sees value in cyclicals and touts further gains, particularly in the major bank stocks.
"Labor-cost pressures and business efforts to mitigate them support our portfolio preferences geared toward yield-enhanced securities and, in the stock market, economically sensitive sectors, including the Industrials sector," Wells Fargo said. "We believe the financial sector has more room to run and remain favorable in today’s cyclical environment."
Energy was the biggest loser on the day, as oil prices went on a wild ride, hitting a multi-year high after OPEC+ failed to reach a consensus on a output deal. Gains were reversed as oil prices turned negative amid concerns infighting poses a risk to the overall production accord.
Tech, meanwhile, ended the day higher despite initial intraday struggles, with Amazon the standout performer.
Amazon.com (NASDAQ:AMZN) jumped 4% after the Pentagon said it would cancel the $10 billion cloud computing contract awarded exclusively to Microsoft and let Microsoft and Amazon bid again after the latter challenged the initial awarding of the contract.
Microsoft (NASDAQ:MSFT was flat, while Google-parent Alphabet (NASDAQ:GOOGL), and Apple (NASDAQ:AAPL) ended in the green. Facebook (NASDAQ:FB) was lower.
Sentiment on U.S.-listed China tech stocks were hurt following a slump in shares of Didi Global (NYSE:DIDI) after Chinese regulators announced a cybersecurity review of the ride-hailing company amid data privacy concerns.
The move sparked fears that Beijing is looking to adopt a more heavy handed approach to Chinese tech companies abroad that may impend their ability to raise funds through an initial public offering in the U.S.
Baidu (NASDAQ:BIDU), Alibaba Group (NYSE:BABA), and JD.com Adr (NASDAQ:JD) were sharply lower.