Why Nasdaq and S&P 500 Are Sliding While World Rallies

Markets are broadly higher this week, oil is down, a peace deal was signed, and SpaceX just became the world’s fifth-largest company. So why are the Nasdaq and S&P 500 the only major indices going the wrong way?

Two forces are working against the two most-watched US indices at the same time: a hawkish Federal Reserve that just killed rate cut expectations, and a capital rotation pulling money out of the tech-heavy names that dominate both.

Why Tech Stocks Are Taking the Hit First

On the day Trump announced the Iran peace deal, the Nasdaq gained about 3%, and the S&P 500 added nearly 2%. In the following session, both slipped: the Nasdaq fell 0.41%, and the S&P 500 dropped 0.19%. The Dow, by contrast, hit a record above 52,000 on the same day both slipped.

The reason sits with the Fed. Kevin Warsh removed the easing bias from the Fed’s statement on June 16, and the dot plot abandoned its last projected rate cut for 2026. With inflation running at 4.2%, higher rates look more likely than lower ones.

That hurts the Nasdaq and S&P 500 more than the Dow because both carry heavy weightings in technology companies, and tech stocks are growth stocks, valued on earnings years into the future.

When rates stay high, those future earnings are worth less in today’s money. The industrial, energy, and consumer names that dominate the Dow are far less sensitive to that pressure.

SpaceX and the Rotation Away From Big Tech

The other factor is where capital is going. When the peace deal landed, the biggest beneficiaries were the assets most beaten down by the Iran conflict: European industrials, Japanese exporters, and energy-dependent sectors. The STOXX 600 hit an all-time high. Japan’s Nikkei surged nearly 5% and crossed 70,000 for the first time.

Money rotated there fast, and some came from richly valued US tech positions that had held up relatively well through the conflict.

SpaceX also entered the equation. Trading as SPCX on Nasdaq, the stock surged nearly from its June 12 IPO price of $135 to a high of nearly $220 and briefly overtook Amazon. A newly listed stock attracting that level of attention draws capital, and some of that capital comes from existing Nasdaq positions rather than fresh money entering the market.

The Nasdaq and S&P 500 are not falling because investors are worried. They are falling because investors found something they like more.

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