Financials Rose, Tech Fell Before Kevin Warsh Fed Debut

Investors moved money into banking and finance stocks and away from technology on Tuesday, as markets turned their attention to the first Federal Reserve policy meeting under Chairman Kevin Warsh.

Key Takeaways:

• XLF gained 1.5% Tuesday while XLK fell 2.8%, as investors moved into financials and out of tech.
• Chip stocks led the tech selloff, with the Philadelphia semiconductor index dropping 5.7%.
• Over five sessions, Robinhood Markets and Coinbase paced XLF while storage names led XLK.

The State Street Financial Select Sector SPDR ETF (XLF) gained 1.5% on the session, while the State Street Technology Select Sector SPDR ETF (XLK) fell 2.8%, according to State Street data. The moves came a day before Warsh’s first policy meeting, where the Fed held rates steady but nine of 19 policymakers signaled a rate hike before year-end, according to Reuters.

See more: Apple’s WWDC 2026 Creates Buy Opportunity for XLK

Broader market indexes showed the same pattern. The Dow Jones Industrial Average climbed 0.64% to a record close of 51,999.67, while the S&P 500 slipped 0.57% and the Nasdaq Composite lost 1.15%, according to Reuters.

Chip stocks drove much of the decline in technology. The Philadelphia semiconductor index slid 5.7% on the session, according to Reuters. Within XLK, Monolithic Power Systems, Inc. (MPWR) fell 9.3% and Intel Corp. (INTC) dropped 8.5%, according to State Street.

Mark Luschini, chief investment strategist at Janney Montgomery Scott, pointed to the prior day’s steep run-up as a reason for the pause. “We had a big move yesterday in the market,” Luschini told Reuters. “We’re just digesting some of those gains and the setup in anticipation of the Fed meeting is always a little tentative.”

Kevin Warsh Fed Debut and the 5-Day ETF Picture

On Wednesday, the Fed held rates in the 3.50% to 3.75% range while Warsh launched a sweeping review of central bank operations, according to Reuters. Interest rate futures markets shifted to price in a hike as soon as September, three months earlier than traders had expected before the meeting.

Within XLF, JPMorgan Chase & Co. (JPM), the fund’s largest holding at 11.5% of assets, advanced 3.7% on the session, while Fiserv, Inc. (FISV) rose 4%, according to State Street data.

Over the trailing five sessions, XLF climbed 3.6%, according to State Street. Robinhood Markets, Inc. (HOOD) topped the fund’s holdings over that span with a 15.5% advance, while Block, Inc. (XYZ) gained 9.6% and Coinbase Global, Inc. (COIN) added 8.9%.

XLK’s five-day picture looked different. Storage names led the way, with Western Digital Corp. (WDC) rising 31.6%, SanDisk Corp. (SNDK) gaining nearly 21% and Seagate Technology Holdings (STX) advancing 21.9%, according to State Street.

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