Dow rallies on oil drop while semiconductors tumble, leaving Wall Street mixed

Wall Street closed mixed Tuesday as a sharp decline in semiconductor stocks overshadowed improved investor sentiment from falling oil prices. Markets are closely watching the outcome of the Federal Open Market Committee meeting scheduled for Wednesday, even as sector rotation continued throughout the session.

The Dow Jones Industrial Average rose 537.24 points, or 1.03 percent, to close at 52,747.32. The S&P 500 gained 15.60 points, or 0.21 percent, to finish at 7,428.78. The tech-heavy Nasdaq Composite fell 55.17 points, or 0.22 percent, to end at 24,876.91.

Tuesday's session was defined by a sharp rotation out of semiconductors — one of this year's top-performing sectors — and into "old economy" industries. Dow components Coca-Cola and paint maker Sherwin-Williams led the charge after both posted earnings surprises, surging 5.0 percent and 8.3 percent, respectively.

Software, data analytics and IT consulting stocks, which had lagged this year amid concerns that AI-driven disruption could erode their businesses, also rallied broadly. Salesforce climbed 4.6 percent, while Cognizant Technology gained 6.9 percent, Accenture 6.9 percent, FactSet 6.8 percent, Adobe 4.8 percent and ServiceNow 4.8 percent.

Semiconductor stocks, by contrast, extended their steep decline amid heavy selling pressure. The Philadelphia Semiconductor Index plunged 4.5 percent, marking its fourth consecutive session of losses.

Micron led the declines with a drop of 8.9 percent, followed by AMD (-8.2 percent), Intel (-5.9 percent), Qualcomm (-4.2 percent) and Marvell Technology (-7.8 percent). SK Hynix's American depositary receipt fell 8.98 percent, extending its losing streak to three consecutive sessions. The ADR now trades roughly 13 percent below its offering price of $149.

Ross Mayfield, an investment strategist at Baird, told CNBC that "there's really a broad rotation going on," adding that the momentum reversal, now in its sixth to eighth week, "has a lot more to do with technical factors in the market than it does a change in fundamentals."

Falling oil prices also provided a tailwind for investor sentiment, with West Texas Intermediate futures dropping below $80 a barrel for the third straight session.

Brent crude futures settled at $84.09 a barrel, down 4.8 percent from the prior session, while WTI futures closed at $79.26 a barrel, a decline of 4.1 percent.

Investors are closely watching the Federal Reserve's policy decision due Wednesday. Wall Street banks expect the Fed to hold its benchmark rate at the current 3.50 to 3.75 percent range, but have not ruled out the possibility of a surprise hike this month given uncertainty in the Middle East and rising inflation risks.

According to the CME's FedWatch tool, interest rate futures markets priced in roughly a 70 percent probability that the Fed would leave rates unchanged at the meeting.