By Sinéad Carew and Ankika Biswas

(Reuters) -The Nasdaq rallied 1.3% on Tuesday, buoyed by strength in Nvidia and other tech megacaps, while the Dow slipped as retailers weighed and investors waited for crucial inflation data due out this week.

AI chip firm Nvidia climbed 6.8%, bouncing back after a three-session sell-off, and the broader chip sector outperformed with the Philadelphia Semiconductor index adding 1.8%.

Chips were among the biggest boosts for the S&P 500 technology index’s recovery from a three-day slide while companies such as Alphabet, up 2.7%, and Meta Platforms, rising 2.3%, were the biggest boosts to the communication services index.

The rest of the S&P 500’s 11 major industry sectors were much weaker by comparison on Tuesday in contrast with the prior day’s session when previously lagging sectors such asenergy and utilities were the biggest gainers.

“Seeing the tech stocks perking up has been a key driver” for Tuesday’s market, said Emily Roland, co-chief investment strategist at John Hancock Investment Management. She added that after a few days of weakness, “investors that have scooped up some of those names today were looking for a better entry point.”

Potentially adding to the bias for megacaps was the Conference Board’s survey, which showed U.S. consumer confidence easing slightly in June amid worries about the economic outlook. Its consumer confidence index fell to 100.4 from a downwardly revised 101.3 in May.

“In an environment where economic growth is potentially decelerating, which we’re seeing signs of, that would tend to benefit higher-quality stocks that have less sensitivity to the economic cycle,” Roland said.

The Dow Jones Industrial Average fell 299.05 points, or 0.76%, to 39,112.16, the S&P 500 gained 21.43 points, or 0.39%, to 5,469.30 and the Nasdaq Composite gained 220.84 points, or 1.26%, to 17,717.65.

The Dow pulled back from a one-month high hit on Monday and home improvement retailer Home Depot was its biggest percentage decliner, dropping 3.6%

Creating some jitters was retail giant Walmart, whose shares fell 2.2% after its CFO flagged the second quarter as the “most challenging quarter” at the NYSE 2024 European Investor Conference in London.

After three straight sessions of gains, the Dow Jones Transport Average closed down 0.8% after falling around 1.6% earlier in the day. Freight rail company Norfolk Southern was its second-biggest decliner after an analyst cut the price target and the National Transportation Safety Board reviewed a derailment last year and recommended safety changes.

However, after dipping 0.05% in the regular session, transport heavyweight FedEx rallied 15% in after-the-bell trading when it forecast 2025 profit above analysts’ estimates. It said it expected planned cost reductions to deliver margin gains, even as revenue remains challenged by lackluster demand for parcel shipping.

The most anticipated economic data due this week is the personal consumption expenditures (PCE) price index – the Fed’s preferred inflation gauge – on Friday.

Spirit AeroSystems shares fell 3.96% to $31.76 after a media report on Monday said Boeing offered to buy the airplane fuselage maker in a mostly stock deal valuing its key supplier at about $35 per share. Boeing shares also fell 2.2%.

Cruise operator Carnival Corp advanced 8.7% after raising its annual profit forecast for the second time this year.

Declining issues outnumbered advancers by a 1.62-to-1 ratio on the NYSE where there were 122 new highs and 87 new lows.

On the Nasdaq, 1,681 stocks rose and 2,589 fell as declining issues outnumbered advancers by a 1.54-to-1 ratio.

The S&P 500 posted 20 new 52-week highs and 4 new lows while the Nasdaq Composite recorded 45 new highs and 178 new lows.

On U.S. exchanges 10.01 billion shares changed hands compared with the 11.90 billion moving average for the last 20 sessions.

(Reporting by Sinéad Carew in New York, Ankika Biswas and Lisa Mattackal in BengaluruEditing by Shounak Dasgupta, Maju Samuel and Matthew Lewis)

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