Nvidia, megacaps power strong Nasdaq recovery; Dow pulls back By Reuters

By Ankika Biswas and Huiheng foreign exchange dealer trading volume rankingLisa Pauline Mattackal

(Reuters) - The tech-heavy Nasdaq jumped over 1% on Tuesday, buoyed by strength in Nvidia (NASDAQ:) and other megacaps, while the Dow slipped as investors awaited a crucial inflation print this week for further cues on the U.S. monetary policy path.

AI chip firm Nvidia soared 6%, recovering some of the steep losses it had notched in three consecutive declining sessions. At current levels, the stock is still 12% away from last week's record high.

"The Nvidia story is currently more of a technical one, and not necessarily fundamental. It could be a great stock in the long run, but investors just need to be cautious," said Cetera Investment Management's chief market strategist, Brian Klimke.

Holdings (NASDAQ:), Broadcom (NASDAQ:) and Applied Materials (NASDAQ:) also gained 2%-4%, helping the Philadelphia SE semiconductor index rise 1.4% after its recent slide.

Megacaps including Alphabet (NASDAQ:) and Meta Platforms (NASDAQ:) rose 2% each, helping the communication services index gain 1.3%. Technology led sectoral gains, up 1.5%, recovering from a three-day slide.

The recent pullback in tech and tech-adjacent stocks had prompted investors to lap up lagging sectors, with utilities and energy enjoying strong gains on Monday.

"We've been calling for broadening to other segments for a while. Indexes are really concentrated within a few top holdings, so even though you've been hurt recently by these names doing so well, it's good to be diversified," Klimke added.

The Dow pulled back from a one-month high hit on Monday, while the small-cap index also lost some steam.

The Dow Jones Transport Average also dropped 1.5% after recent gains. Index-heavyweight FedEx (NYSE:) lost 1% ahead of its quarterly results after markets close.

Technology and other growth stocks have driven the S&P 500 and the Nasdaq to record highs this year, but the continued underperformance in the value-tilted Dow has raised some concerns over the sustainability of equity strength.

The most-anticipated event of the week is the personal consumption expenditures (PCE) price index - the Fed's preferred inflation gauge - on Friday.

Traders see 61% odds of a 25-basis-point rate cut in September, and are eyeing around two cuts by the year-end, according to LSEG's FedWatch data.

At 11:58 a.m. ET, the was down 292.73 points, or 0.74%, at 39,118.48, the S&P 500 was up 17.30 points, or 0.32%, at 5,465.17, and the was up 211.11 points, or 1.21%, at 17,707.92.

Spirit AeroSystems (NYSE:) slumped 5.3%. A report showed Boeing (NYSE:) has offered to acquire the airplane fuselage maker in a deal funded mostly by stock that values its key supplier at about $35 per share. Boeing dropped 3%.

Cruise operator Carnival (NYSE:) Corp gained 7.4% after raising its annual profit forecast for the second time this year.

Walmart (NYSE:) fell 2.5% after its CFO flagged the second quarter as the "most challenging quarter" at the NYSE 2024 European Investor Conference in London.

Declining issues outnumbered advancers for a 2.05-to-1 ratio on the NYSE and for a 1.46-to-1 ratio on the Nasdaq.

The S&P index recorded 18 new 52-week highs and two new lows, while the Nasdaq recorded 32 new highs and 120 new lows.

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