Three Major Indexes Edge Lower: Tech Pullback Drags Nasdaq, Energy Sector Bucks Trend

On July 29 local time, the three major U.S. stock indexes closed lower but with limited declines. The Dow Jones Industrial Average fell 0.12% to 39,582.36; the S&P 500 fell 0.24% to 5,437.89; and the Nasdaq Composite dropped 0.51% to 17,630.12, a relatively larger decline. The market showed a divergent pattern, with tech stocks taking profits dragging the Nasdaq, while the energy sector strengthened on a rebound in oil prices.

Tech Stocks Take Profits, Weighted Stocks Weaken

The tech sector was a major drag today. Among large-cap tech stocks, Apple, Microsoft, Google parent Alphabet, and Amazon all declined between 0.5% and 1.2%. Chip stocks also came under pressure, with Nvidia down 1.8%, AMD down 1.5%, and Intel down 0.7%. Analysts said tech stocks had accumulated significant gains recently, and some investors chose to lock in profits after the peak earnings season. Additionally, a slight rebound in U.S. Treasury yields weighed on growth stocks. The 10-year yield rose 2 basis points to 4.23%.

However, some individual tech stocks performed well. Cloud company Salesforce rose 2.3% after announcing an expanded stock buyback plan. Cybersecurity firm Palo Alto Networks continued its rally following strong earnings, adding 3.1% today.

Energy Sector Leads, Oil Rebound Boosts

The energy sector was the best performer today, up 1.5% overall. International crude oil prices rebounded after consecutive declines. WTI crude futures settled at $78.90 per barrel, up 1.8%; Brent crude closed at $82.40, up 1.6%. Oil majors Exxon Mobil rose 2.0%, Chevron up 1.7%, and ConocoPhillips up 2.3%. On the news front, data from the U.S. Energy Information Administration (EIA) showed crude inventories fell 4.2 million barrels last week, exceeding the expected 2.5 million barrel decline, and gasoline inventories also fell, easing demand concerns.

Geopolitical factors also supported oil prices. Tensions in the Middle East escalated again, with Israel-Hamas ceasefire negotiations stalled, raising supply disruption risks. Energy analysts noted that oil prices may remain volatile with a bullish bias in the short term, but global economic slowdown expectations still cap upside.

Defensive Sectors Attract Funds; Utilities and Healthcare Up

In a generally weak market, capital flowed into defensive sectors. Utilities rose 0.8%, healthcare up 0.5%. Power company NextEra Energy gained 1.1%, pharmaceutical giant Pfizer up 0.9%, and Merck up 0.6%. This reflects investors seeking safe-haven assets amid rising uncertainty.

The financial sector was mixed, with bank stocks overall down 0.2%. JPMorgan fell 0.3%, Goldman Sachs down 0.4%, but Wells Fargo rose 0.8% after announcing a dividend increase. The consumer discretionary sector fell 0.6%, with Tesla down 1.2% and Amazon down 0.8%.

Economic Data and Fed Focus

Today's economic data was mixed. U.S. June pending home sales index rose 1.2% month-over-month, beating the expected 0.5%, indicating stabilization in the housing market amid rate cut expectations. However, the June Chicago Fed National Activity Index came in at -0.15, below the prior reading, suggesting a slowdown in economic expansion.

Markets are eyeing Friday's release of the June Personal Consumption Expenditures (PCE) price index, the Fed's preferred inflation gauge. Economists expect core PCE year-over-year growth to ease from 2.6% in May to 2.5%, still above the Fed's 2% target. The CME FedWatch Tool shows markets assign a 78% probability that the Fed holds rates steady in September and a 22% chance of a 25-bps cut.

Recent Fed officials' comments have been broadly hawkish. Minneapolis Fed President Neel Kashkari said today that while inflation progress has been made, more data is needed to confirm the timing of rate cuts. He emphasized the Fed is not in a hurry to ease policy, as premature cuts could reignite inflation.

Outlook: Earnings Season Wanes, Focus on Inflation and Geopolitical Risks

As the second-quarter earnings season nears its end, market attention will shift back to macro fundamentals. So far, over 65% of S&P 500 constituents have reported results, with about 78% beating earnings estimates but only 58% beating revenue expectations, indicating pressure from rising costs and slowing demand.

Technically, the S&P 500 has been trading in a narrow range of 5400-5500 points recently, with short-term moving averages intertwined and lacking clear direction. The Nasdaq remains near the middle of its upward channel, but the MACD indicator shows a bearish divergence, warning of further pullback risk. The energy sector, benefiting from oil rebound and low valuations, may serve as a safe haven for short-term funds.

Geopolitical risks remain a key factor. Besides the Middle East, U.S.-Europe trade tensions have heated up again, with the EU announcing retaliatory tariffs on some U.S. goods, including steel and aluminum products. This could disrupt the industrial and materials sectors.

Overall, U.S. stocks may remain volatile in the near term. Investors should closely monitor inflation data trends, central bank policy signals, and external shocks, flexibly adjusting portfolio allocations.