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The Nasdaq and S&P 500 rebounded on Tuesday, following a steep stock sell-off spurred by Chinese startup DeepSeek and the ripple effect its potentially cheaper AI model could have on Big Tech.
Bellwether Nvidia (NVDA) was the standout of the trading day, with shares finishing the day up nearly 9% after it shaved off a record $589 billion from its market cap in the previous session.
Aided by Nvidia’s gains, the tech-heavy Nasdaq Composite (^IXIC) surged over 2%, coming off a closing loss of more than 3%. The S&P 500 (^GSPC) rose around 0.9%, while the Dow Jones Industrial Average (^DJI) gained roughly 0.3%.
Notably, the tech sector notched its biggest two-day reversal in over two years after it notched its worst day since March 2020 on Monday.
Stocks began to chip away at losses booked in Monday’s tech-led rout, which came as buzz built for DeepSeek’s potentially cheaper AI model. That risk to US leadership in AI raised questions about whether chipmakers and other tech names can follow through on high earnings expectations.
With the DeepSeek risk in mind, focus is tighter on Big Tech earnings coming this week, with results from Apple (AAPL), Tesla (TSLA), Meta (META), and Microsoft (MSFT) on the docket.
Investors also assessed a tougher tone on tariffs from President Donald Trump as markets look ahead to the Federal Reserve’s interest rate decision on Wednesday where the impact of his policies will likely be discussed.
The central bank is expected to leave interest rates unchanged, given recent solid economic readings.
The dollar (DX=F) strengthened after renewed tariff threats from Trump that revived worries about a trade war, already in focus after a brief standoff with Colombia. Trump said he wants universal tariffs “much bigger” than the 2.5% his incoming Treasury Secretary, Scott Bessent, reportedly plans to introduce gradually.
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