U.S. stocks closed lower on Tuesday evening, with the Dow Jones Industrial Average retreating from an earlier record high driven by Home Depot's strong rally. Technology stocks weighed broadly on the market with widespread declines.

The Dow Jones fell 84.47 points, or 0.19%, to close at 44,827.35 points. The Nasdaq dropped 308.20 points, or 1.42%, to 21,321.58 points. The S&P 500 declined 44.44 points, or 0.69%, to 6,404.71 points.

Earlier on Tuesday, the Dow reached an intraday record high of 45,207.39 points.

Technology giants and prominent semiconductor manufacturers saw broad declines. Nvidia fell approximately 3%, while Advanced Micro Devices and Broadcom dropped over 5% and 4% respectively. Palantir, which had surged previously, plummeted nearly 9%, becoming the worst performer in the S&P 500. Other major technology stocks including Tesla, Meta Platforms, and Netflix also faced pressure.

"The AI boom may not be fading, but it might need a pause," said Jayson Bronchetti, Chief Investment Officer at Lincoln Financial Group. "After the Nasdaq's over 40% surge since April, history suggests a pause in the rally is normal. The market needs to recalibrate based on the latest economic data and Federal Reserve policy expectations."

Bronchetti added: "When capital rotates toward more companies across sectors that can demonstrate AI applications improving profit margins and efficiency, potential sector rotation and broader participation could support more sustained gains, though volatility may persist in the near term."

Home improvement retailer Home Depot gained 3.7% after maintaining its full-year outlook, briefly driving the price-weighted Dow to its morning record high. However, the company's second-quarter earnings fell short of expectations.

Investors are awaiting earnings reports from Lowe's, Walmart, and Target later this week to gain insights into consumer performance amid uncertain inflation prospects and evolving U.S. trade policy.

Wall Street is also preparing to glean clues from Powell's remarks regarding the Federal Reserve's remaining policy meetings this year. Central bank officials from around the world will gather in Jackson Hole, Wyoming, this week for the Fed's annual economic symposium, where Powell will deliver a key address.

According to CME's FedWatch tool, federal funds contracts indicate an 83% probability of a 25 basis point rate cut at the Fed's next policy meeting in September.

"Powell's speech on Friday at Jackson Hole could be a market inflection point, and we expect him to signal potential rate cuts at the September meeting," said Stephen Schwartz, founding partner at wealth management firm Pioneer Financial. "As we move into the second half of 2025, valuations may have even greater room for expansion as investors begin to focus on 2026 earnings, with earnings expectations improving due to potential rate cuts and trade policy clarity."

Tuesday's volatility followed a relatively quiet trading session. On Monday, the S&P 500 closed down less than 1 point, just shy of the record high set the previous week.