The nascent rebound in tech stocks ended in a lurching drop on Tuesday, with the Nasdaq composite losing about 1% in its largest blown gain since early January.
The slide extended a bout of volatility that has raised worries that stocks’ record run is rooted in the staggering gains of a handful of chip companies. Some fear that a narrow rally won’t survive pressure expected from higher interest rates, worries about the AI trade and the pending avalanche of new tech shares that kicks off Friday with the massive SpaceX public offering.
But even as the S&P 500 fell 0.3% Tuesday, nine of its 11 sectors—including real estate, consumer staples and healthcare—traded in the green. Many gainers were tied to the real economy: Shares in Home Depot were among the Dow’s best performers, while Jif maker J.M. Smucker led the S&P 500.
Friday’s surprisingly strong jobs report raised worries that interest rates will climb, but reassured those worried about the economy. One place that is evident: transportation stocks.
Airline, trucking and railroad stocks are often considered market bellwethers, given the companies’ vital role in moving goods and raw materials that power the economy. And the Dow Jones Transportation Average, which tracks 20 of the largest, has climbed for five straight sessions, extending its 2026 gains to 29%.
Among stocks that have hit records in recent days are Old Dominion Freight Line, up 59% this year, Ryder System, up 45%, and logistics firm Matson, up 57%.
Companies with strong profits
Strong earnings growth has powered this year’s rally through war in the Middle East, concerns about AI and jitters in private credit. While big tech companies have made up much of the growth in recent years, other firms are making up ground.
Companies in the materials sectors have reported a roughly 42% jump in profits as of Friday, while consumer discretionary and financials have seen a 41% and 22% increase, respectively, according to FactSet.
Earnings growth is expected to remain robust. Analysts polled by FactSet expect companies to see a 22% surge in profits for the second quarter. For the full year, they expect a 23% jump.
Equal-weighted exposure
Many indexes weight companies by market value. For those worried that tech is having undue influence on the direction of markets, indexes that instead give each company equal weight offer one alternative.
The S&P 500’s equal-weighted version has now gained more than 8% this year, edging ahead of the market-cap version’s 7.9%.
Options
More than 50 million bearish “put” option contracts changed hands during Friday’s tech selloff, the second-highest daily volume on record behind the April 2025 tariff selloff, show Cboe Global Markets data. Puts give investors the right to sell shares at a certain preset price and become more valuable as the underlying stock’s price decreases, so they are used by investors betting stocks will go down.
Options volumes tied to the S&P 500 hit a record 7.8 million contracts on Friday, according to Cboe. Around 64% were zero-day-to-expiry options, or so-called 0dte contracts that allow investors to bet on whether the stock index will rise or fall by the end of the day.
Beyond the U.S.
Some investors are looking abroad, where stocks have been cheaper and seemingly less vulnerable to fractures in the U.S. AI trade.
The biggest winner is South Korea’s Kospi, which has skyrocketed 92%, on pace for one of its best years on record. But that is heavily influenced by surging shares of chip makers Samsung and SK Hynix.
So instead, some are turning to places like Japan and Europe, reviving an early-year bet that the U.S.’s wide lead on the rest of the world will shrink because of factors such as fiscal stimulus in Japan and a boom in European military spending. Japan’s Nikkei is up 30%, while the U.K.’s FTSE 100 is up 3% for the year.
Write to Krystal Hur at krystal.hur@wsj.com