Previous Session Close

Monday’s session split the market cleanly in two. The S&P 500 barely held green at +0.02% while the Nasdaq 100 dropped 0.31%, dragged lower by a broad tech selloff. The Russell 2000 told the other side of the story — up 0.60% as small-caps absorbed the capital fleeing mega-cap growth names. The Dow gained 0.48%, lifted by the same value rotation.

Sector performance made the divide obvious. Technology (XLK) fell 0.90% and Energy (XLE) was the session’s worst at -2.11%. On the other side, Consumer Discretionary (XLY) led at +1.31%, followed by Financials (XLF) at +1.01% and Healthcare (XLV) at +0.51%. The VIX closed at 19.1, up 2.30% — not panic territory, but the upward drift signals hedging demand is building as the chip selloff extends.

Overnight Futures & Global Read

The tech bleed is continuing overnight. Nasdaq futures are down 0.83%, pointing to another session of pressure on AI and semiconductor names. Dow futures are bucking the trend at +0.69%, reinforcing the rotation signal. S&P futures are roughly flat at -0.03%, caught between the two forces. Russell futures are holding (+0.03%).

The divergence between Nasdaq and Dow futures — nearly 150 basis points — is the widest gap this stretch has produced. That spread is the rotation trade expressed in real time: money moving from growth concentration into broader industrials and financials.

Commodity & FX Setup

Commodities are lower across the board. WTI crude fell 1.9% to $81.04, which helps explain yesterday’s Energy sector weakness and suggests another tough session for XLE if oil stays here. Gold dropped 1.1% to $4,030 — unusual during a tech selloff, since gold typically catches risk-off flows. The decline suggests this isn’t a broad risk-off event but a sector-specific repricing. Copper is off 0.35% at $6.32, a mild read but one worth monitoring as a growth proxy.

The dollar (DXY 101.6) is marginally firmer at +0.11%. Sterling was notably weak at -0.53%, while EUR/USD slipped 0.23%. The rates picture is relatively benign — 10-year yields down to 4.641% and the 30-year at 5.125% — which should support equity multiples outside of the sectors under direct pressure.

Catalyst Watch

Three storylines from the headlines could drive today’s tape. First, the AI hardware selloff is intensifying — headlines point to a competitive threat from China and draw parallels to Cisco’s dot-com era collapse. That comparison, whether fair or not, has a way of feeding momentum selling in semiconductor names.

Second, Amazon reportedly winding down most of its flagship AI models marks a strategic shift that could ripple across the AI supply chain. If the largest cloud spender is rethinking its model approach, that reprices the capex assumptions baked into chip and infrastructure plays.

Third, Fitch flagging an AI market correction as a major global credit risk adds an institutional voice to the selloff narrative. Credit agencies framing a sector rotation as systemic tends to widen the conversation beyond equity desks.

Bottom Line

The setup heading into Tuesday’s open is bifurcated — defensive on mega-cap tech, constructive on value and small-caps. Watch the Nasdaq 100 for whether the pre-market weakness deepens below Monday’s close or finds a bid. The single most important driver today is whether the AI hardware selloff stays contained to semis or bleeds into the broader cloud and software complex. At Luna3, we’re watching that contagion boundary as the tell for whether this is a healthy rotation or something heavier.

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