Markets Kick Off Q3 with Tech Rotation; Dow Rallies Amid Geopolitical Tensions and Fed Stance

U.S. equity markets have begun the third quarter with a notable shift in investor sentiment, as the Dow Jones Industrial Average experienced a rally while the S&P 500 remained largely flat. This divergence signals a significant rotation out of technology stocks, with investors reallocating capital to other sectors as the new quarter commences.

The market’s opening days of Q3 are also being shaped by escalating geopolitical tensions, which have pushed oil prices to a critical $100 per barrel mark, fueled by ongoing concerns surrounding the Iran-Israel conflict. Gold, traditionally a safe-haven asset, has seen increased demand, outperforming Treasurys and other traditional havens.

Adding to the complex market backdrop, Federal Reserve Chair Jerome Powell reiterated the central bank’s cautious stance on interest rate cuts, attributing the hold to the impact of current tariffs. Meanwhile, the political landscape continues to influence specific sectors, with the recent passage of a ‘megabill’ in the Senate, championed by former President Trump, leading to a jump in clean energy stocks after the removal of a tax on solar and wind projects.

Individual stock movements are also under scrutiny, with Tesla’s upcoming delivery figures keenly awaited by Wall Street, where analysts appear less than bullish. Conversely, billionaire Ken Griffin’s Citadel hedge funds are reportedly all in the green for 2025, indicating strong performance in a volatile environment.

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