US stocks: S&P 500, Nasdaq close lower, dragged by Alphabet and megacap tech; focus on Iran

The S&P 500 and the Nasdaq closed down on Monday, dragged lower by declines in the megacap technology stocks including Alphabet, while investors assessed developments in U.S.-Iran negotiations.

The Dow closed higher, boosted by the healthcare and industrial sectors.

SpaceX tumbled and weighed heavily on the Nasdaq Composite. The Elon Musk-led company launched ‌its first-ever debt offering ⁠on ⁠Monday and said it had about $100.8 billion in cash and cash equivalents as of June 19.

Optimism about artificial intelligence has supported Wall Street’s recent rally, but analysts noted that more investors have been questioning lofty spending on infrastructure expansion by hyperscalers.

Alphabet fell sharply while Meta, Amazon and Microsoft also fell.

“This is a very sentiment-driven sector and the group tends to trade together on a day-to-day basis,” said Bill Northey, senior investment director at US Bank.Also Read | US stocks: Vimeo owner Bending Spoons seeks $1.62 billion US IPO, sources say “But as we step back … some of the strongest fundamentals are within the AI data center buildout space. That includes ⁠both the hyperscalers ‌as well as many of the components that go into that continued buildout.”

The next test for the rally will be Micron Technology’s quarterly results on Wednesday. Shares of the memory chipmaker are ⁠up nearly 300% this year.

According to preliminary data, the S&P 500 lost 25.41 points, or 0.34%, to end at 7,475.17 points, while the Nasdaq Composite lost 339.67 points, or 1.28%, to 26,178.26. The Dow Jones Industrial Average rose 162.36 points, or 0.29%, to 51,727.06.

Oil prices fell as Washington and Tehran agreed on a roadmap toward a final deal within 60 days.

U.S. and Iranian officials made “great progress” at the first round of their talks in Switzerland that ended early on Monday, mediators said, although tensions persisted over Lebanon and the Strait of Hormuz.

“Energy prices are coming down, which is certainly ‌a catalyst for both the consumer as well as businesses,” Northey said. “On the flip side of that, we came out with a very hawkish (Federal Reserve) under new Chair Kevin Warsh, and it led the market to believe that ⁠there will be a more prioritized focus on returning to price stability in the near term.”

This view on the Fed has lifted U.S. Treasury yields and pressured stock prices lower, he said.

A focus this week will be on Thursday’s Personal Consumption Expenditures (PCE) data, the Fed’s preferred gauge of core inflation. A stronger-than-expected reading could reinforce expectations of a hawkish Federal Reserve, after Warsh underscored the need to curb inflation at last week’s meeting.

Markets currently expect a 25-basis-point rate hike from the Fed in September, according to LSEG data.

Among other movers, Apogee Therapeutics jumped after AbbVie said it would acquire the biotech company for $10.9 billion in cash.