Wall Street snaps 6-day win streak as S&P 500 and Dow turn red

Wall Street finally lost momentum on Tuesday as the tech rally that had been dragging indexes higher gave out, ending a six-day streak of gains.

According to data from CNBC, the S&P 500 closed at 5,940.46, dropping 0.39%, while the Dow Jones Industrial Average fell by 114.83 points, or 0.27%, to finish at 42,677.24. The Nasdaq Composite followed the same path, losing 0.38% and closing at 19,142.71.

Tech stocks—after leading the charge for nearly a week—got dumped fast. The entire sector lost 0.5%. Nvidia slipped 0.9%, and Advanced Micro Devices, Meta Platforms, Apple, and Microsoft were all down.

It was a sharp reversal from the past few weeks, where these names had been pushing the S&P 500 up more than 20% since the lows of April. That rally was driven by President Donald Trump’s announcement of fresh tariffs, which initially rattled investors but then calmed when signs of a pullback emerged.

Tech drops as Trump struggles to push tax bill through

Tuesday’s session was the first real pause in a market that’s been on a relentless rise. While Monday’s gains were small, they still added to a steep climb that started five weeks ago. But that run was cut off with this session, as the market now waits for clearer signals.

Bill Northey, investment director at US Bank Wealth Management, told CNBC that the big picture is still murky. “We’ve had the swoon related to the introduction of tariffs, the furious rally associated with the de-escalation of those tariff implementations, and now we’re awaiting clarification as many of these negotiations are ongoing,” he said.

Meanwhile, Trump faced resistance from his own party. On Tuesday, he failed to persuade a group of House Republicans to support a key tax bill that’s been stalled over the cap on state and local tax deductions. That opposition threatens to kill the legislation, which Trump had hoped to pass before the Memorial Day weekend.

While most of tech struggled, Tesla bucked the trend. CEO Elon Musk told the Qatar Economic Forum that he plans to lead Tesla for the next five years. “Yes, no doubt about that at all,” Musk said. That small but direct statement helped push Tesla stock up 0.5%, even as the rest of the market pulled back.

Investors turn bearish, Treasury yields swing after downgrade

Sentiment among big investors continues to sink. Early May data showed that 38% of institutional investors were underweight on US stocks, the lowest figure since May 2023. Excluding 2023, it hasn’t been this low since right before the 2008 crash.

And over the past five months, that percentage has dropped by around 70 points, the biggest fall ever recorded. Money is flowing into European equities instead. The gap between investors overweight Eurozone stocks compared to US ones has widened to a net 75%, the highest since October 2017.

Just four months ago, that same stat was sitting at a negative 62, the worst since 2012. The turnaround has been massive. Treasury yields were bouncing around on Tuesday as traders tried to guess what the Federal Reserve will do next.

The 30-year Treasury yield rose 3 basis points to hit 4.969%, after breaching 5% on Monday. The 10-year yield nudged up by 1 basis point to land at 4.485%. It had crossed 4.5% the day before, before easing back down.

The bump in yields came after Moody’s Ratings knocked down the US credit rating from Aaa to Aa1, putting it in the same tier that Fitch and S&P dropped it to in 2023 and 2011, respectively. Vishnu Varathan, head of macro research at Mizuho Securities, didn’t downplay the move. He called it “admittedly significantly dire” in a note. But he also said the downgrade was “inconsequential” for markets right now.

Even though the yield reaction could hit fragile investor confidence, Varathan explained it wouldn’t wreck the bigger recovery. He wrote that the downgrade won’t hurt the liquidity or collateral value of US Treasurys, so there’s no “imminent shock” or forced selling coming from the change.