U.S. equities rebounded Tuesday, with the S&P 500 gaining 0.89% to close at 687.94, recovering from recent AI-driven volatility ahead of President Trump's State of the Union address.
The rally came as investors shook off last week's tech selloff triggered by concerns over AI capital expenditure returns and software displacement fears. The Nasdaq 100 led major indices with a 1.06% advance to 608.80, while the Dow Jones added 0.71% and the Russell 2000 climbed 1.16%. Trump touted 53 record market highs since the election during his evening address, reinforcing bullish sentiment despite lingering tariff uncertainty—his new 10% global tariffs took effect today following the Supreme Court's strike-down of broader duties.
Consumer confidence rebounded in February, easing recession fears as households grew less pessimistic about job prospects despite persistent inflation concerns. The data provided a macro tailwind, though investors remain focused on whether the Federal Reserve will adjust its rate trajectory. Australian inflation data released overnight showed sticky price pressures, stoking speculation of additional rate hikes abroad and highlighting the global central bank challenge.
Sector performance (NASDAQ):
- Utilities surged 3.13%, leading all sectors as defensive positioning intensified
- Consumer Cyclical jumped 2.53% on improved confidence readings
- Industrials gained 1.88%, benefiting from infrastructure optimism
- Technology lagged at just 0.62% despite the broader rally, still digesting AI valuation concerns
- Energy barely moved (+0.03%), weighed down by demand uncertainty
Volume leaders included semiconductor-related names, with NVDA posting 175.8 million shares traded ahead of its highly anticipated earnings report. The SOXS (3x inverse semiconductor ETF) saw extreme activity with 606.7 million shares, reflecting continued hedging around chip stocks.
Investor takeaway: The market's ability to rebound from AI-driven weakness suggests underlying resilience, but technology's muted participation signals caution remains warranted. With tariff implementation underway and Nvidia earnings on deck, near-term volatility is likely to persist even as broader economic data stabilizes.