Market Recap - Tuesday, September 23, 2025
Tech Pullback Weighs on Markets, Small Caps and Value Shine
Stocks slipped today as investors took a breather following Monday’s tech-fueled rally. The S&P 500 fell 0.55%, the Nasdaq dropped 0.95%, and the Dow slid 0.19%. Small caps fared better, with the Russell 2000 down just 0.24%, and market breadth was actually positive, with value stocks and equal-weighted indices outperforming. The big drag came from mega-cap tech, with Nvidia and Amazon leading the decline, as the AI trade faced a wave of scrutiny over ROI, financing practices, and monetization potential.
Sectors like software, pharma, homebuilders, and telecom underperformed, along with retail-investor favorites. But energy, banks, transports, credit cards, and apparel names saw gains, helped by the bounce in oil and value rotation. Gold extended its rally, rising another 1.1% and pushing to new highs above $3,800, while Treasury yields dipped slightly. Bitcoin eased 0.5%, and oil rose 1.8% but finished well off intraday highs.
Fed Chair Powell largely repeated his comments from last week, warning of inflation risks while defending the recent rate cut as a risk-management move. Meanwhile, Fed Governor Bowman struck a more urgent tone, saying the Fed is at risk of falling behind the curve if it doesn’t move faster on rate cuts. The flash PMI reports were mixed — still showing growth, but with softening demand and difficulty passing on higher tariff-driven costs. The Richmond Fed’s manufacturing index dropped sharply, hinting at ongoing softness in industrial activity.
Nvidia dominated the headlines again following its big OpenAI investment, but the move sparked fresh concerns about vendor financing “circularity” and inflated demand for AI chips. Bain & Co. added to that caution with a report estimating an $800B shortfall in AI-related revenues by 2030. Elsewhere, McKesson raised long-term guidance, Boeing was boosted by China order chatter, and Firefly Aerospace and Opendoor both tumbled on disappointing results and insider selling, respectively.
Here’s Our Take
Today’s market action reflects a growing tug-of-war between tech-driven optimism and macroeconomic reality. While the broader economy remains relatively healthy — supported by easing inflation, resilient consumer demand, and a gradual shift toward rate cuts — investors are beginning to question just how sustainable the AI trade really is, especially with elevated valuations and monetization hurdles in focus. The recent spotlight on vendor financing in AI (like Nvidia funding customers who then buy its chips) has echoes of past bubbles, and it’s fueling a bit more skepticism.
At the same time, the broader market is showing signs of healthy rotation. Small caps, cyclicals, and value names outperformed, hinting that investors aren’t heading for the exits — they’re just getting more selective. The Fed remains the key swing factor, with Powell staying cautious and some officials pushing for faster easing. That uncertainty, combined with seasonality, buyback blackouts, and quarter-end rebalancing, may keep volatility elevated in the near term. But beneath the surface, the bull case — anchored by rate cuts, strong balance sheets, and long-term tech innovation — is still intact.
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