The Dow Jones Industrial Average fell on Tuesday as Wall Street considered the likelihood of Congress passing a tentative deal on raising the U.S. debt ceiling.
The 30-stock index lost 50.56 points, or 0.15%, to end at 33,042.78. The S&P 500 eked out a 0.002% gain to close at 4,205.52, after trading both above and below the flatline during the session. The Nasdaq Composite added 0.32% to finish at 13,017.43, paring gains after trading up as much as 1.4% earlier in the day.
President Joe Biden and House Majority Leader Kevin McCarthy reached an agreement to raise the debt ceiling and avoid a default over the weekend, with Congress set to vote on the legislation as early as Wednesday. Both Republican and Democratic support is needed for the proposed bill to pass.
The agreement comes just days before the so-called X date on Monday, which is the earliest date the Treasury Department has signaled the U.S. could default on debt obligations. The long negotiations between the White House and congressional leaders raised concern among investors that a default could take place. Despite the tentative agreement, obstacles remain on the path to passage for the compromise bill in the House amid growing opposition within the GOP.
"Markets climb walls of worry at the end of the day, and the debt ceiling is obviously some type of worry," said Chris Barto, investment analyst at Fort Pitt Capital. "But I think the market is kind of pricing in some sort of deal does get done."
Concern over the potential for another interest rate hike also weighed on investor sentiment. Traders are pricing in a 68.8% chance of a Federal Reserve rate increase next month, according to the CME Group's FedWatch tool.
Richmond Fed President Tom Barkin also said at a National Association of Business Economics event Tuesday that he hasn't "backed off" from his rate forecast, which he said is among the higher ones within the central bank.
"The Fed is still a major focus for all investors," said Brian Price, head of investment management at Commonwealth Financial Network. "It's really a tug of war between what the Fed is likely to do: whether or not they are going to hike one or two more times, or just sit tight and wait and see how incoming inflationary data is over the next couple of months."
The Nasdaq was helped by a nearly 3% rally in Nvidia. The artificial intelligence-related stock reached a $1 trillion market cap — an elite marker surpassed by just a handful of stocks — at one point in Tuesday's session, as shares continued to rally following its strong earnings report last week.
— CNBC's Christina Wilkie and Fred Imbert contributed reporting
The Dow finished Tuesday lower about 0.2%.
The S&P 500 finished little changed after flickering around the flatline for much of the session. The Nasdaq Composite ended 0.3% higher but was off the session high of nearly 1.4%.
— Alex Harring
Despite some near-term headwinds, Tesla looks "set up well" for share gains over the long run, according to Barclays.
"Simply, not only is Tesla set up to be the primary beneficiary of the global EV transition with a significant lead on cost, but it is also the leader in establishing the software-defined vehicle of the future," wrote analyst Dan Levy in a Tuesday note to clients.
Even amid demand constraints and recent price cuts introduced by the company, Levy views the Model 1 and Cybertruck as "key steps forward" in Tesla's share expansion opportunity. These models should offer Tesla access to the pickup market and lower price tiers, he wrote.
"Overall, we reaffirm our OW rating and Tesla, and see it as a long-term winner in the global EV race," he said. "Yet we believe the question of model concentration must be addressed on its path of volume growth."
— Samantha Subin
Investors should still expect stocks to go "up in the first half and down in the second half" in 2023, according to Trivariate Research founder Adam Parker.
He said mega-cap technology stocks remain for risk management, not the "alpha group." And he said investors who use an S&P 500 benchmark should own close to benchmark weight of Meta, Alphabet, Microsoft, Apple and Amazon, while being exposed to other sectors.
The S&P 500 has added 9.6% so far this year. Within the index, the communication services and information technology sectors have been the two best performers on the year, with each rallying more than 30% year to date.
— Alex Harring
Bank of America raised its price target on Nvidia to $500 per share from $450. The new target implies upside of 28.4% from Friday's close.
"We reiterate Buy on top pick NVDA following CEO keynote at Computex (Annual computer expo) in Taiwan over the holiday weekend," analyst Vivek Arya wrote. "Transforming into a data center powerhouse, NVDA highlighted how its full-stack platform has supported AI leadership, with company already partnered with >1,600 genAI startups (plus top hyperscalers). Indeed, AI upside is driving strong performance YTD (+180% vs. SOX +40%), but we believe we are only at the start of the story.
— Fred Imbert, Michael Bloom
Bernstein wrote in a client note Tuesday morning on electric power infrastructure company Quanta Services "in a full embrace of the energy transition." Quanta shares were up 3.3% Tuesday afternoon.
"PWR owns the picks and shovels that will be used to make the energy transition a reality," analyst Chad Dillard wrote in a Monday note.
Dillard estimated transitioning the entire U.S. economy to electric power will require $2 trillion of power grid spending.
CNBC Pro subscribers can read more about the call here.
— Hakyung Kim
RBC Capital lifted its year-end target for the S&P 500 to 4,250 from 4,100 as the tech-led market rally continued, seeing double-digit gains for 2023.
The new target is only about 1% higher than the S&P 500′s Friday close of 4,205.45 but it would represent a 10% gain for the year.
RBC's new target stands above the average year-end forecast of 4,157 from Wall Street strategists, according to CNBC Pro's market strategist survey, which rounds up the top 15 strategists' predictions.
— Yun Li
The Dow was the sole major index trading down as investors entered the final hour of the trading day.
The 30-stock average slid around 0.3%.
Meanwhile, the S&P 500 was little changed after flickering around the flatline for much of the session.
The Nasdaq Composite was solidly up with a 0.5% advance, helped by a nearly 3% rally in Nvidia. But the technology-heavy index was off its session high of nearly 1.4% up.
— Alex Harring
While crypto exchange Coinbase may seem volatile, the stock presents attractive returns for investors willing to wait out until the longer term, according to Atlantic Equities.
The firm upgraded Coinbase shares to overweight from neutral. Analyst Simon Clinch maintained his price target of $70, which implies shares rallying 23% from Friday's close.
"The company is regaining custody asset share and is also leveraging its trust credentials to exercise pricing power – both important steps towards building resilience in the model," Clinch said in a Tuesday note.
Read more about his upgrade here.
— Hakyung Kim
The Russell 1000 Growth ETF (IWF) reached a high not seen in more than a year.
The ETF was up 0.2% to hit an intraday high of $262.09. That's a level not seen since April 20, 2022, when the fund closed at $264.61.
Ginkgo Bioworks, ChargePoint and Carvana led the way up for the ETF with jumps larger than 10%.
— Alex Harring, Gina Francolla
Richmond Fed President Thomas Barkin warned that he thinks inflation will remain stubborn going forward, noting that he hasn't "backed off" from his rate forecast — which he said is among the higher ones within the central bank.
— Fred Imbert
Energy stocks were among the worst performers in the S&P 500. The moves dragged the sector down 1.5%.
The decline in energy stocks came as oil prices fell 4%.
Some of the biggest laggards in the sector included APA Corp, Devon Energy, Halliburton and Coterra Energy, all down at least 3% each. EQT Corporation lost 4.7%, while Marathon Oil and Diamondback Energy lost 2.7% and 1.7%, respectively.
— Samantha Subin
Roth upgraded shares of alcoholic beverage maker Boston Beer to buy from neutral.
The bank was previously cautious on the beverage group's shares — but it now says warmer weather and gross margin improvements make it optimistic.
"We believe Seltzer and Truly will benefit in the summer from Bud Light share losses (occasion overlap increases with warmer weather) and gross margin lift from production shift will be realized in 2Q (given inventory days timing)," the firm said in a Tuesday note.
CNBC Pro subscribers can read more about the upgrade here.
— Hakyung Kim
Here are some of the stocks moving the most during midday trading:
Read the full list of stocks moving here.
— Samantha Subin
Three Dow components are trading at new 52-week highs on Tuesday even as the 30-stock average lags the broader market.
Microsoft, Apple and Salesforce are all trading at recent highs.
Outside of the Dow, several semiconductor stocks have hit all-time highs, including Broadcom, ON Semiconductor and KLA Corp.
Meanwhile, Dow component 3M is one of the stocks hitting new 52-week lows on Tuesday. Other notable names include Target, Dollar General, Bristol-Meyers and Keurig Dr Pepper.
—Jesse Pound, Gina Francolla
Ark Invest's Cathie Wood, known for her investments in next-generation technologies, missed out on the jaw-dropping rally in Nvidia — the biggest winner in artificial intelligence this year.
Her flagship Ark Innovation ETF (ARKK) exited Nvidia entirely in early January, before the chipmaker went on to enjoy a powerful rally that propelled it to a $1 trillion market capitalization.
Wood revealed that her reason for dumping Nvidia was its high valuation.
"At 25x expected revenue for this year, however, $NVDA is priced ahead of the curve," Wood said in a Twitter post on Monday.
— Yun Li
Oil prices were down more than 4% on Tuesday as market observers weighed the likelihood of Congressional approval of the U.S. debt ceiling agreement and looked to the OPEC+ meeting slated for this weekend.
Brent crude dropped $3.28, or 4.3%, to $73.79 a barrel. U.S. West Texas Intermediate crude lost $3.06, or 4.2%, to $69.61.
Energy stocks were the worst performer in S&P 500, down around 1.5% in Tuesday's session. With Wednesday marking the last trading session of the month, the sector is also set to see the worst performance in May with a 9.3% drop so far.
— Alex Harring
The Dow underperformed in Tuesday trading, losing more than 100 points while the Nasdaq Composite and S&P 500 traded up.
Visa, Merck and Procter & Gamble all weighed on the 30-stock index, with losses of more than 1.6%.
But nine stocks were able to avoid the drawdown. Intel was the best performer of Dow stocks in the session, gaining 2.8%.
— Alex Harring
Ford Motor could be in for big gains ahead, according to Jefferies. The firm said Ford's recent investor event raised its confidence that the automaker has a solid plan and management that will help it close a gap with its rivals.
Jefferies upgraded the company's shares to buy from hold. Shares were up 3% Tuesday.
"Ford has in recent months refined a strategy to leverage group strengths and fill the gap between the quality of its product franchises and returns that have lagged peers and lacked consistency," analyst Philippe Houchois wrote in a Tuesday note.
CNBC Pro subscribers can read more about his upgrade here.
— Hakyung Kim
Wall Street's chart analysts are warning that market breadth is alarmingly weak, with recent market gains powered largely by the AI boom lifting stocks like Nvidia and Alphabet.
CanaccordGenuity technical analyst Javed Mirza said in a note to clients on Monday that an "intermediate-term equity market correction looms" if market breadth does not improve.
Entering Tuesday, the Nasdaq-100 had gained more than 18% over the past three months, and the S&P 500 has advanced nearly 6%. Meanwhile, the Invesco S&P 500 Equal Weight ETF (RSP) has fallen more than 3%.
Read more about technical analysis on CNBC Pro.
— Jesse Pound
The Conference Board's consumer confidence index came in above expectations for May, with a reading of 102.3. Economists polled by Dow Jones expected a print of 99. To be sure, that's still down from a revised April reading of 103.7.
"Consumer confidence declined in May as consumers' view of current conditions became somewhat less upbeat while their expectations remained gloomy," said Ataman Ozyildirim, senior director of economics at The Conference Board.
"Their assessment of current employment conditions saw the most significant deterioration," Ozyildirim added. "Consumers also became more downbeat about future business conditions. ... However, expectations for jobs and incomes over the next six months held relatively steady."
— Fred Imbert