LIVE MARKETS-Wall Street ends mixed as Fed, megacaps take center stage

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WALL STREET ENDS MIXED AS FED, MEGACAPS TAKE CENTER STAGE

U.S. stocks ended mixed on Tuesday in a choppy, wait-and-see session, with investors balancing a steep drop in semiconductor shares against strength in defensives and financials. With the Federal Reserve set to announce its latest policy decision on Wednesday and several Big Tech heavyweights reporting earnings in the coming days, many traders appeared reluctant to make big bets.

The Fed is widely expected to keep interest rates unchanged at the conclusion of its meeting. CME's FedWatch Tool shows markets pricing in roughly a 69% chance policymakers hold the target rate at 3.50%-3.75%, compared with a 31% chance of a quarter-point hike.

The focus will quickly shift to earnings, with Amazon AMZN.O, Meta META.O and Microsoft MSFT.O reporting later this week. Investors will be looking for evidence that their heavy AI investments are beginning to pay off. Apple AAPL.O, which posted a record close, also reports in the days ahead, adding to what could be a pivotal week for the market.

Beneath the headline moves, market breadth remained encouraging with a majority of S&P 500 .SPX sectors finishing in positive territory. Healthcare .SPXHC, up more than 2%, was the leading gainer. Staples .SPLRCS also had a strong session. Energy .SPNY and Technology .SPLRCT, each losing more than 1%, were the weakest groups. Regional banks .KRX, software shares .SPLRCIS and biotech .NBI also outperformed, while gold and silver miners .XAU joined chip stocks on the weak side.

The PHLX Semiconductor Index .SOX fell more than 4%, leaving it 24.6% below its June 22 record close and highlighting the pressure that has recently weighed on the chip group.

Yet despite the weakness in tech, the broader market continued to show signs of expanding leadership. The NYSE Composite .NYA, S&P 500 Financials .SPSY, S&P 500 Banks .SPXBK, S&P 500 Healthcare, S&P 500 Value .IVX and the Equal Weight S&P 500 .SPXEW all finished at record highs, suggesting the rally is no longer resting solely on the shoulders of the mega-cap tech names.

That improvement in participation offered some encouragement for Nasdaq bulls. The Nasdaq Composite's New High/New Low Index rose for a second straight session, ending at about 35%. While the rebound remains modest and the indicator is still below its declining 10-day moving average, the recent uptick points to a gradual improvement in market internals—a small but welcome step in the right direction.

Here is a snapshot of where markets stood shortly after 4 p.m. EDT.

(Terence Gabriel)

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(Terence Gabriel is a Reuters market analyst. The views expressed are his own)