Health care stocks climbed to a record on Tuesday and pulled most of the market up with them. Of the 503 members of the S&P 500, 404 closed higher, more than twice as many as on Monday.

The index itself gained only +0.28%, because the largest technology companies sat the rally out. Apple, Alphabet and Meta lost between 1% and 1.6% each, the Nasdaq Composite finished flat and the Dow jumped +1.02%. Brent crude swung by more than $5 after an unconfirmed report of progress toward U.S.-Iran talks, pending home sales fell to a record low, and SpaceX’s surge in AI revenue lifted chip stocks after the bell.

Index Performance

Cross-Asset Snapshot

Most Stocks Rose, the Largest Did Not

The S&P 500 rose to 7,712.57, and the Dow gained 529.85 points to 52,495.88. The Russell 2000 jumped +1.65% to 2,773.42. The Nasdaq Composite slipped −0.02% to 26,424.82, and the Nasdaq 100 lost −0.13% to 29,490.28. The S&P 500 value index rose 0.9% and its growth counterpart fell 0.2%, Reuters reported.

The equal-weight version of the index did far better than the headline number. The Invesco S&P 500 Equal Weight ETF (RSP) rose +1.15%, while the SPDR S&P 500 ETF (SPY) added +0.34%, and the average S&P 500 member gained +1.14%. Technology and communication services were the only S&P 500 sectors to fall, by 0.3% and 0.9%, according to Reuters. The Communication Services Select Sector SPDR (XLC), which holds Meta and Alphabet at capped weights, still edged up +0.09%.

Measured by market value, health care stocks added about 0.21 percentage point to the S&P 500 and financials about 0.13 point. Eli Lilly alone contributed about 0.05 point, the most of any stock. Technology and communication services took away about 0.26 point between them, yet most of their members rose: 44 of 75 in technology and 18 of 22 in communication services. The drag came from the giants. Apple and Alphabet’s two share classes subtracted about 0.19 point together, and Meta another 0.04.

Monday looked like the reverse. That day the S&P 500 rose +0.41% while only 176 of its members gained, and the average stock fell −0.34%. The index rose by a similar amount on both days, but the gains came from opposite ends of the market.

Sorting the S&P 500 by last week’s performance shows how sharply the pattern flipped. On Monday, the fifth of the index that fell most last week, down an average of −10.4%, was the only group to rise. On Tuesday it was the weakest group, up +0.39% with barely half its members higher, while every other fifth rose between +1.15% and +1.59% and close to nine in ten of their stocks gained. The correlation between last week’s change and the day’s change went from −0.37 on Monday to +0.26 on Tuesday.

After two sessions, last week’s worst fifth is up an average of about 1.1% since Friday, and its best fifth about 1.2%. The groups in between, mostly stocks that had moved little last week, have gained less.

The October rotation picked up again. RSP is up +3.77% in October and SPY +0.84%, a gap of 2.9 percentage points, the widest of the month. Monday had narrowed it to 2.1 points.

Health Care Stocks Reach a Record

The health care sector led all 11 groups in the S&P 500 and hit a record high, according to Reuters. The Health Care Select Sector SPDR (XLV) rose +2.37%, and 55 of the sector’s 60 index members closed higher. Moderna gained +6.69%, Bristol Myers Squibb +4.84% and Lilly +3.49% to $1,283.66. Amgen rose +3.29%, Merck +3.25%, UnitedHealth +3.04% and Johnson & Johnson +2.19%, and those four did much of the lifting in the Dow.

Most of the gains came without company news. Investors are “still a little skeptical around the AI trade,” Jim Baird, chief investment officer at Plante Moran Financial Advisors, told Reuters, and he named health care as one of the beneficiaries as money looks for opportunities outside technology. Moderna had a reason of its own. It and Merck are set to present late-stage data on their personalized melanoma vaccine, given with Keytruda, at the European Society for Medical Oncology congress on October 24, 24/7 Wall St. noted. Moderna is up +25.7% in October.

The sector has been one of the main destinations for money leaving technology. Since October 6, the last close before the chip selloff began, XLV has gained +7.62% while the Technology Select Sector SPDR (XLK) has lost −8.20%. For October as a whole, energy leads the 11 sector funds at +10.52%, followed by consumer staples at +8.87% and health care at +6.77%, and technology is last at −5.27%. UnitedHealth has gained +14.2% this month and Lilly +10.9%.

Drugmakers and insurers have little exposure to data center financing, and their profits do not depend on the cost of borrowed money the way a debt-funded cloud provider’s do. Tuesday’s buying fits that logic. The questions hanging over the AI trade did not get any easier, and investors kept adding to the sectors that sit outside it.

The AI Build-Out Stays Under Pressure

Technology stocks opened lower and spent most of the day lagging. The Philadelphia Semiconductor Index fell −0.29% a day after snapping an eight-session losing streak, and the suppliers of the AI build-out fared worse than the chipmakers. Lam Research fell −3.21%, KLA −2.80% and Applied Materials −1.97%. Comfort Systems USA, which installs mechanical and electrical systems in data centers, lost −4.57%. Quanta Services dropped −3.62%, Eaton −2.43% and GE Vernova −1.99%.

Lam reports its September-quarter results on Wednesday. Through October 15 it had fallen nine sessions in a row, its longest losing streak since it began trading in 1984, Benzinga noted last week. The day’s heaviest selling fell on the companies whose orders depend on data center construction: the toolmakers that equip chip plants and the contractors that wire and cool the buildings.

News from overseas kept financing worries in view. Shares of Elice, a South Korean cloud-computing company tied to the AI boom, tumbled more than 30% in their stock market debut, The Wall Street Journal reported. CoreWeave fell as much as −6.4% before closing up +1.65% at $62.13. The company has borrowed billions of dollars to build data centers as interest rates rise quickly, and the Journal described its funding practices as widespread across the industry, which makes it a test case for the broader sector.

Power remains a constraint alongside financing. Overnight, Australian data center operator NextDC cut its fiscal 2027 underlying EBITDA forecast to A$245 million to A$265 million from A$385 million to A$410 million after the utility Jemena suspended part of the grid work needed to raise power supply to its M3 site in Melbourne, citing “community and stakeholder opposition” and a lack of local council consent, The Motley Fool Australia reported. NextDC now expects the added power in fiscal 2028 and is pausing projects not backed by customer contracts. Its shares fell as much as 44% in Sydney on Wednesday, Bloomberg reported.

Memory stocks split. Western Digital rose +3.44% and Seagate +2.17%, while Micron slipped −0.98% and Sandisk −0.42%. Nvidia fell −0.29%, AMD −0.62% and Broadcom −0.07%.

The low for technology came early. Five-minute index prices show the Nasdaq 100 down about 1% at 9:45 a.m. It turned positive by about 10:15, peaked at about +0.5% around 11 a.m. and spent the afternoon near flat before closing at −0.13%. The turn lined up with a sharp drop in oil.

An Unconfirmed Iran Report Moves Oil

Brent crude touched $111.90 early in the day, its highest level in five months, Nairametrics reported. By mid-morning it had fallen more than $5. Oil reversed after the London publication Al-Araby Al-Jadeed reported that mediators had presented a proposal to revive talks between Iran and the U.S., the Journal reported. The report was not confirmed, and Bloomberg reported that claims the two countries were close to an agreement were inaccurate, according to Rigzone.

Diplomatic contacts continued in public. Iran’s president, Masoud Pezeshkian, met Pakistan’s army chief, Field Marshal Asim Munir, in Tehran to discuss Pakistan’s mediation efforts, according to Iran’s Nournews as cited by Nairametrics. Pakistan brokered an interim peace agreement in June that later collapsed.

Prices won back part of the drop by the settlement. December Brent settled at $108.79, down −0.7%, and December WTI at $97.82, down −$0.72. November WTI expired at $101.79, down −1.8%, after trading in a range of about $9 ahead of expiration, Rigzone reported. With the midterm elections two weeks away, “the optics are just as important as the fundamentals,” Dan Pickering, chief investment officer at Pickering Energy Partners, said.

The premium for prompt U.S. crude eased into the expiration. The gap between November and December WTI, about $5.12 a barrel on Monday, closed at $3.97. With November gone, the U.S. benchmark now trades about $11 below Brent. Natural gas fell −2.03%. The Energy Select Sector SPDR (XLE) rose +0.25%, and Halliburton added +1.85% to $33.59 after higher oil prices lifted its quarterly results.

Housing Weakens as Mortgage Rates Climb

Housing starts fell −5.2% in September to a seasonally adjusted annual rate of 1.221 million, the Census Bureau said. Starts were −7.4% below a year earlier, and single-family starts fell −4.6% to 859,000. Building permits slipped −0.2% to 1.40 million, with single-family permits down −4.0% to 845,000. The monthly change in starts is within the survey’s margin of error of plus or minus 11.8%, but the level is the second lowest since mid-2020, after May’s 1.182 million.

Contract signings fell further. The National Association of Realtors’ pending home sales index dropped −7.3% to 66.0 in September, the lowest since the series began in 2001, against economists’ forecast of a 0.5% decline, Reuters reported. The index was −11.3% below a year earlier, and contracts fell in all four regions. NAR chief economist Lawrence Yun blamed fast-rising mortgage rates. Freddie Mac’s 30-year fixed rate averaged 7.40% last week, the highest in nearly three years.

The data extend a run of weak housing reports. On Monday, the National Association of Home Builders said builder confidence had fallen to its lowest since 2012. Homebuilder stocks rose anyway, carried by the broad rally and a drop in long-term Treasury yields. D.R. Horton gained +3.59%, Lennar +3.66% and PulteGroup +3.27%.

Rates, Gold and the Fed

The Treasury curve flattened. The two-year yield rose 2.6 basis points to 4.785%, the Journal reported, while the 10-year yield fell 1.9 basis points to 5.117% by 3 p.m. and the 30-year yield 4.7 basis points to 5.425%. The Journal tied the decline in long-term yields to lower oil prices, which eased some inflation expectations. The gap between two- and 10-year yields narrowed to about 33 basis points from about 38 on Monday.

The dollar index fell −0.26% to 101.725 as unrest in France calmed, according to the Journal. Bitcoin rose +0.90% to about $82,470, and the VIX fell −6.13% to 17.31. Gold futures slipped −0.52% to $4,138.40 and barely reacted to the swings in oil.

Rate expectations hardly moved. Applying the CME FedWatch method to settlements of 30-day fed funds futures puts the odds of a hike at the October 27-28 meeting at about 16%, down from 18% on Monday. The odds of at least one hike by the December 9 meeting held near 93%, and the futures price in about 27 basis points of tightening by then. The rise in the two-year yield fits that picture: traders still treat a December increase as close to certain, even as oil eases and housing weakens.

Around the Market

Tesla was the strongest of the Magnificent Seven, rising +1.54% a day before its earnings report, and Amazon edged up +0.07%. Meta fell −1.59% ahead of its own results on Wednesday. Alphabet lost −1.13%, Apple −1.00%, Microsoft −0.31% and Nvidia −0.29%.

Industrial earnings moved stocks in both directions. 3M rose +5.78% to $171.37 after raising its full-year adjusted profit forecast to $9.10 to $9.15 a share. Third-quarter adjusted earnings rose 12% to $2.50 a share and adjusted organic sales grew 3.3%, the company said. The results followed Monday evening’s news of an expanded data center deal with Amazon, under which 3M issued Amazon a warrant for up to 3.2 million shares that vests as cumulative purchases of its optical connectivity and other data center products reach $6 billion over seven years, along with other milestones.

General Motors fell −6.84% to $77.09 even though its third-quarter adjusted earnings of $3.70 a share beat estimates of $3.63. GM narrowed its full-year forecast to $12.75 to $13.75 a share, a range whose midpoint sits below analysts’ $13.41, and said commodity inflation, including logistics and chips, will cost about $2 billion this year, Reuters reported. The finance chief warned of a similar hit next year if costs do not ease. The board approved a $20 billion share buyback.

GE Aerospace fell −3.67% after raising its 2026 adjusted profit forecast to $8.00 to $8.10 a share from $7.65 to $7.85. Revenue from commercial engines and services rose 21% to $10.34 billion, according to Reuters. Engine parts maker Howmet Aerospace fell −3.82%. Defense contractors did better. Northrop Grumman rose +4.57% to $534 after forecasting 5% to 7% sales growth in 2027, and RTX gained +0.64% after raising its 2026 growth outlook for the third time this year, the Journal reported.

Equifax jumped +11.33% after third-quarter profit beat estimates, and Hasbro rose +11.2% to $109.52 after raising its full-year revenue and digital gaming forecasts, as demand for collectible cards picked up ahead of the holiday season. Salesforce agreed to buy the customer-engagement software company Braze for about $5.66 billion including debt, and Braze shares jumped +52% to $45.57, according to the Journal. Salesforce shares were little changed.

After the close, SpaceX said third-quarter revenue more than doubled, the Journal reported. Revenue rose 161% to $14.6 billion, above the $12.86 billion analysts expected, and revenue from SpaceX’s AI computing business nearly tripled from the second quarter to $7.56 billion, with customers including Google and Anthropic, Fortune reported. Operating income was $2.79 billion. The shares were up +7.95% at $159.70 in extended trading by 8 p.m.

On the earnings call, Elon Musk said he was “fairly confident” SpaceX can bring an incremental 10 gigawatts of computing capacity online in 2027, and that it will aim to add 20 gigawatts of power and cooling infrastructure next year. He expects the first test chip from the company’s planned Terafab chip plant to work around May or June at a research fab in Austin, with volume production targeted for around the third quarter of 2028 and the fourth quarter also possible. He also said a shortage of AI computing would last a long time and that short-term rental contracts were renewing at higher prices per watt, according to a call transcript published by Investing.com. Musk said SpaceX and Tesla have each formed special committees to study a merger, and that he cannot take part in the talks because he is conflicted. Finance chief Bret Johnsen said the company is talking with several pools of debt capital to fund its growth, according to the Journal.

Chip stocks rose in after-hours trading while SpaceX reported and held its call. By 8 p.m., the iShares Semiconductor ETF (SOXX) was +2.53% above its regular-session close, with AMD up +3.07%, Micron +2.15% and Nvidia +2.09%. Nasdaq 100 futures gained about 1% by 6:30 p.m. and held most of it. The data center builders that fell during the day bounced as well: Vertiv rose +5.03%, Quanta +2.02% and Eaton +1.93%, and CoreWeave added +4.63%.

Netflix fell nearly 6% to $64.66 in extended trading after forecasting fourth-quarter earnings of 67 cents a share, below the 73 cents analysts expected. Third-quarter revenue rose 11.8% to $12.87 billion, its slowest growth in nearly three years, and the company cut its 2026 advertising revenue forecast to about $2.7 billion from about $3 billion, Reuters reported. The stock had closed at $68.69, down −1.66%.

My Take

I think the market is waiting for Meta’s results. For now, SpaceX’s earnings call gave it a lift. Musk’s plans to add computing capacity, the timeline for the Terafab chip plant and his view that a lasting shortage will keep rental prices rising pushed chip stocks and the Nasdaq higher after the close. If Meta’s outlook on Wednesday is good too, I think the market can attempt a turnaround.

The companies that build data centers and supply their power still look weak to me. NextDC’s shares fell as much as 44% in Sydney after local opposition halted work on the power connection for its Melbourne data center and the company slashed its earnings forecast. So I don’t see a true reversal yet, but I think a short-term turn is worth trying for.

In Tuesday’s premarket, futures were hammered down, bounced, and were hammered down again, over and over. Shortly after the open they finally swept down to around last Friday’s closing price. I wonder if that shows a will to defend that level. My GEX levels had a node there, near 29,374, but the market fell so hard in the first 15 minutes that buying it was frightening even as I did it. I took a small profit and got out, and the market then rallied hard.

December Nasdaq 100 futures bottomed at 29,391.75 shortly after 9:45 a.m., about 12 points above Friday’s 4 p.m. price of 29,379.50. Their overnight low had been 29,478.50. From the bottom they climbed to 29,903.50 by about 10:35 a.m.

What’s Next

Meta reports after the close on Wednesday, the first of the largest AI spenders to do so this season. Tesla, IBM, Lam Research and Texas Instruments report the same evening. Meta’s capital spending plans will be read across the whole AI trade, Lam’s outlook will show whether chipmaking equipment orders are holding up, and Tesla’s call comes a day after Musk’s comments on a possible merger with SpaceX.

On Thursday, Procter & Gamble, Union Pacific, Lockheed Martin, Blackstone and Comcast report in the morning, along with weekly jobless claims. Western Digital, Newmont and Bloom Energy follow after the close. Friday brings American Express and SLB, S&P Global’s October purchasing managers’ indexes and the final University of Michigan consumer sentiment reading.

Amazon reports on October 29, the company said, and Microsoft and Alphabet are expected next week as well. Fed officials remain in their quiet period ahead of the October 27-28 meeting.

Bottom Line

Tuesday’s gains reached four of every five stocks in the S&P 500 and skipped the largest ones. Investors bought drugmakers, insurers, banks and homebuilders, and kept selling the companies that build and equip data centers.

That leaves the market healthier underneath than the index suggests, and still waiting on the AI spenders. Meta’s results on Wednesday, followed by Microsoft, Alphabet and Amazon next week, will show whether the money keeps flowing to the companies that sold off this month.