Tech Sector Drags Markets Lower as Crypto Retreats Amid Broadening Rotation

Equities faced pressure Tuesday as tech stocks led declines, with the Nasdaq dropping 1.5% and the S&P 500 slipping 0.6%. Semiconductor giant AMD plunged 5%, while Palantir cratered nearly 10% - marking one of the S&P's worst performances. The selloff extended across megacaps including Nvidia, Tesla and Meta, signaling cooling momentum after the sector's 40% rally since April.

Investors are reassessing AI-driven valuations ahead of key Fed decisions and slowing earnings growth. While the long-term AI thesis remains intact, markets appear to be entering a more selective phase. "The pause was inevitable after such a vertical move," said one portfolio manager, speaking on condition of anonymity.

Notably, capital rotated into defensive sectors like utilities and consumer staples, with Home Depot gaining 4% despite mixed results. All eyes now turn to retail earnings from Walmart and Target for clues on consumer resilience.