Nasdaq drops 1% as tech selloff deepens, Dow gains 0.66%

The Nasdaq Composite extended its decline to 1% on July 3, deepening a tech-led selloff, while the Dow Jones Industrial Average rose 0.66% in the widest divergence between the two indexes in recent weeks. The S&P 500 slipped 0.23%, as investors rotated out of growth names into defensive sectors.

The technology selloff followed a volatile start to the third quarter. On July 1, the iShares Semiconductor ETF dropped 4.7%, with Micron Technology falling 8.2% as investors locked in profits after the stock more than tripled in the second quarter, according to Bloomberg data. Meta Platforms surged 11.3% that same session on plans to build a cloud business, but the broader tech sector remained under pressure.

The Dow's 0.66% gain was supported by defensive and industrial names, while the Nasdaq's 1% decline reflected continued selling in high-multiple technology stocks. The S&P 500's 0.23% decline masked the breadth of the move, with advancing and declining stocks nearly evenly split. The divergence comes as the U.S. 10-year Treasury yield held near recent levels, while the dollar index traded at 101.41, according to Reuters data. Oil prices remained a focus, with WTI crude near $68 a barrel after falling more than 2% on July 1 as optimism over U.S.-Iran talks eased supply concerns.

Traders are focused on the June jobs report, with economists polled by Reuters expecting 110,000 payroll additions and the unemployment rate holding at 4.3%. The data, due for release ahead of the July 4 holiday, will provide the next catalyst for rate expectations. Fed Chair Kevin Warsh said on July 1 that inflation expectations had eased but policy would not be loose, reinforcing the view that rate cuts are not imminent. The ADP National Employment Report on July 1 showed private employment rose by 98,000 jobs in June, below the 118,000 forecast, adding to the uncertainty around the labor market's trajectory.

The divergence between the Dow and the Nasdaq reflects a market grappling with conflicting signals. Technology stocks, which drove much of the first-half gains, face headwinds from elevated valuations and the prospect of higher-for-longer interest rates. Defensive and value sectors, by contrast, offer relative stability in an environment where the Fed has signaled it will hold rates steady. The next major test for the market comes with the jobs report, which could shift rate expectations and determine whether the rotation into value names continues.

This article is for informational purposes only and does not constitute investment advice.