The Nasdaq Composite surrendered 1.15% to close at 26,376.34 on Tuesday, pulling back from Monday’s sharp rally as markets turned their attention to the Federal Reserve’s two-day policy meeting beginning Wednesday, the first chaired by Kevin Warsh since he took office on May 22.
The retreat was broad but uneven across the technology complex. Semiconductor and artificial intelligence names bore the brunt of selling pressure, with Marvell Technology plunging 9.78% in a sharp reversal from the sector’s recent melt-up. Intel shares fell 8.45% to $117.05, while Advanced Micro Devices declined 7.3%.
The quantum computing cohort also suffered steep losses, with Rigetti Computing down 9.07%, D-Wave Quantum off 8.83%, and IonQ losing 8.37%.
MicroStrategy, the Bitcoin proxy and software firm, dropped 6.35%, reflecting broader risk-off sentiment ahead of the Federal Open Market Committee’s rate decision. Social media platform Snap declined 9.63%, continuing its struggle with profitability concerns and competitive pressures in the digital advertising market.
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Against the tide, defensive and value-oriented names outperformed. Constellation Energy gained 2.15%, PayPal advanced 2.73%, and Gilead Sciences rose 2.36%.
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One of the catalysts for Tuesday’s weakness was mounting uncertainty around the Fed’s quarterly Summary of Economic Projections, particularly the so-called “dot plot” that maps individual officials’ interest rate forecasts through 2028 and beyond. Markets had initially hoped Warsh’s appointment might signal a dovish tilt, but a string of robust jobs reports, sticky inflation readings, and elevated energy prices has shifted expectations decidedly toward a “higher for longer” stance.
Fed watchers now anticipate the June dot plot could eliminate the single 2026 rate cut previously penciled in, or even show at least one policymaker projecting a rate increase. That outcome would validate the sharp selloff in long-duration, high-multiple technology stocks that has accelerated since early June.
Adding to the uncertainty is widespread speculation that Warsh may decline to submit his own dot, breaking with 14 years of post-financial crisis practice. Warsh has been publicly skeptical of forward guidance tools and has signaled his intention to fundamentally reshape how the Fed communicates with markets. Such a move would deprive markets of a key anchor for forward expectations and could initially be interpreted as bearish for risk assets, even if Warsh’s stated goal is to restore policy flexibility.
Outlook
The near-term trajectory for technology stocks hinges almost entirely on Wednesday’s Fed decision and Warsh’s inaugural press conference. If the new chair emphasizes data dependence and signals willingness to ease should growth falter, markets could recover quickly. Conversely, a hawkish dot plot combined with rhetoric suggesting fundamental changes to Fed operations would likely extend the current de-rating of high-beta growth names.
Bull Case:
- Tuesday’s pullback represents healthy consolidation after Monday’s large gain, not trend break
- Warsh may emphasize flexibility and data dependence, supporting renewed risk appetite post-FOMC
- Rotation into quality and defensives shows equity demand intact, just repricing duration risk
- Secular AI infrastructure and data center trends remain robust despite near-term multiple compression
- Cheaper, cash-generative tech names gaining traction as value emerges from prior selloffs
Bear Case:
- Hawkish dot plot eliminating 2026 cuts would validate higher-for-longer narrative hurting growth stocks
- Warsh opting out of dot plot introduces policy uncertainty, typically bearish for risk assets
- Stretched semiconductor and AI valuations vulnerable to further de-rating if real yields rise
- Quantum computing faces fundamental valuation reset as Quantinuum IPO provides sober benchmark
- Hot inflation and jobs data limit Fed’s ability to ease, pressuring long-duration equities
