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Dow Soars 426 Points as Investors Shift to Healthcare; Tesla Plunges Amid Trump-Musk Feud
The U.S. stock market opened the third quarter with mixed performance, as the Dow Jones Industrial Average surged 426 points, a 1% gain, driven by a rotation from technology to defensive sectors like healthcare. The S&P 500 traded near flat, while the Nasdaq Composite fell 0.5%, pressured by declines in tech giants. This shift marked a departure from the tech-fueled rally in Q2, where the Technology Select Sector SPDR Fund (XLK) soared 22.8% but slipped nearly 1% at the quarter’s start. Investors are navigating trade uncertainties, fiscal policy debates, and Federal Reserve signals, with the upcoming Nonfarm Payrolls report looming large.
Healthcare stocks powered the Dow’s advance, with Amgen, Merck, and UnitedHealth each climbing approximately 3%, and Johnson & Johnson gaining 1.8%. In contrast, tech heavyweights Nvidia and Microsoft faced selling pressure, reflecting a cooling of the AI and technology growth trade. The market’s risk-on momentum, driven by AI and tech, has likely peaked for now. Robust economic data bolstered cyclical sectors, with the ISM Manufacturing PMI rising to 49.0 in June, surpassing estimates of 48.6, and JOLTS Job Openings jumping to 7.769 million in May, above the expected 7.3 million, signaling labor market resilience.
Tesla shares plummeted over 4% after President Donald Trump suggested the Department of Government Efficiency (DOGE) review subsidies for Elon Musk’s companies, including Tesla, SpaceX, and Starlink, claiming Elon may get more subsidy than any human being in history. Musk, who labeled Trump’s $3.3 trillion tax-and-spending bill as utterly insane and destructive, called for drastic spending cuts. This public clash, escalating from earlier disputes, intensified volatility for Tesla, which has shed significant value in 2025. The Senate narrowly passed Trump’s One Big Beautiful Bill in a 51-50 vote, with Vice President JD Vance casting the tiebreaker. Republican Senators Thom Tillis, Rand Paul, and Susan Collins opposed the measure, which now awaits House approval before a July 4 deadline, raising concerns about its fiscal impact, projected to add $3.3 trillion to the national debt.
At the ECB Forum in Sintra, Portugal, Federal Reserve Chair Jerome Powell signaled that looming tariffs have delayed anticipated rate cuts, noting: Inflation forecasts rose significantly due to tariffs, keeping us on hold. Powell emphasized a data-driven approach, with markets now pricing in a September rate cut, as Goldman Sachs adjusted its forecast from December, citing milder tariff impacts and softening labor market signals. Reimposing steep tariffs after the July 9 reprieve could spark volatility, given elevated market valuations. While not catastrophic, renewed tariffs could unsettle investors, recalling the S&P 500’s near-bear market plunge in April due to Trump’s tariff policies. The index has since recovered, closing Q2 with a 10.6% gain, while the Nasdaq surged 17.8%.
Global markets reflected mixed sentiment. European stocks wavered, with the Stoxx 600 up 0.1%, led by a 1% rise in utilities, while Asia-Pacific markets were uneven—Japan’s Nikkei 225 fell 1.24% to 39,986.33, South Korea’s Kospi rose 0.58% to 3,089.65, and Australia’s S&P/ASX 200 remained flat at 8,451.10. Gold prices climbed over 1% to $3,385 per ounce, driven by trade fears and a weakening dollar, boosting gold-related stocks like Harmony Gold (+3.1%) and AngloGold Ashanti (+3.5%).
Other notable movers included Oshkosh Corp., upgraded by Goldman Sachs to buy with a $131 price target, implying 15% upside, due to declining construction inventories. Kontoor Brands rallied after being added to Goldman Sachs’ conviction list, citing its Helly Hansen acquisition and brand momentum. Diabetes tech stocks, however, slumped after proposed Medicare rule changes affecting reimbursement rates for glucose monitors and insulin pumps, with Tandem Diabetes Care and Beta Bionics dropping 8% and 5%, respectively. Sweetgreen fell over 3% after TD Cowen downgraded it to hold, citing declining urban sales, while Electronic Arts gained on Deutsche Bank’s optimism about its upcoming NCAA basketball game.
As investors brace for potential tariff-driven inflation and monitor the Federal Reserve’s next moves, markets remain on edge. Rate cuts could occur if labor market deterioration emerges, despite persistent inflation risks. With the July 9 tariff deadline and Thursday’s jobs report approaching, the interplay of trade, fiscal, and monetary policies will likely dictate market direction in the coming weeks.
