Nasdaq ends sharply lower as investors rotate out of Big Tech
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[July 12, 2024] By
Noel Randewich and Lisa Pauline Mattackal
(Reuters) -The Nasdaq ended sharply lower on Thursday, hit by losses in
Nvidia, Apple and Tesla as investors rotated into smaller companies
after softer-than-expected inflation data fed bets the Federal Reserve
will cut interest rates in September.
The S&P 500 also lost ground after a Labor Department report showed U.S.
consumer prices fell unexpectedly in June and the annual increase was
the smallest in a year, drawing the Fed closer a September rate cut. The
Dow finished with modest gains.
Interest rates futures suggest traders see an over 90% chance the Fed
will cut rates by its September meeting, up from about 74% on Wednesday,
according to CME Group's Fedwatch.
Despite signs of receding inflation, Wall Street's most valuable
companies lost ground, with Microsoft and Amazon each losing more than
2% and Meta Platforms dropping about 4%.
Tesla tumbled 8.4%, its biggest one-day percentage drop since January,
after Bloomberg News reported the company is delaying the launch of
robotaxi by about two months to October.
Apple fell 2.3% after hitting a record high on Wednesday. BofA Global
Markets raised its price target for Apple, saying it expects strong
iPhone sales driven in part by new AI features.
As sky-high tech-related stocks fell on Thursday, shares of smaller
companies rallied.
The small cap Russell 2000, which has significantly lagged the benchmark
index in 2024, jumped 3.6% to close at its highest since March 2022,
with investors betting rate cuts would improve conditions for smaller
companies.
"What I think investors now believe is that the Fed is ready to start to
cut interest rates. And so they are saying, 'That's good enough for me.
I don't have to wait for them to actually do it'," said Sam Stovall,
chief investment strategist at CFRA Research.
Volume on U.S. exchanges was heavy, with 12.6 billion shares traded,
compared to an average of 11.5 billion shares over the previous 20
sessions.
The S&P 500 declined 0.88% to end the session at 5,584.54 points.
The Nasdaq declined 1.95% to 18,283.41 points, while Dow Jones
Industrial Average rose 0.08% to 39,753.75 points.
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A Wall Street sign is pictured outside the New York Stock Exchange
in New York, October 28, 2013. REUTERS/Carlo Allegri/File Photo
Thursday's declines ended a seven-day streak of record high closes
for the Nasdaq and a six-day streak for the S&P 500. It was the
Nasdaq's biggest one-day percentage drop since April 30.
The S&P 500 real Estate index surged 2.7%, trimming year-to-date
losses to 1%. The communication services and information technology
indexes each fell more than 2%.
Delta Air Lines slumped 4% after forecasting lower-than-expected
profits in the current quarter.
Other major airline stocks also fell, with an index of S&P 500
passenger airline companies down 2.7%.
"This might be a place where consumers are getting pinched by
inflation. That's showing up in discretionary funding on things like
air tickets," said Scott Helfstein, head of investment strategy at
Global X.
Investors are awaiting Producer Price Index data on Friday for
insights into the inflation trajectory, along with second-quarter
earnings from big banks.
Citigroup slipped 1.9% after U.S. bank regulators fined the lender
$136 million.
Conagra Brands fell 1.5% after the packaged foods maker forecast
annual revenue and profit below estimates.
Advancing issues outnumbered falling ones within the S&P 500 by a
3.7-to-one ratio.
The S&P 500 posted 51 new highs and 2 new lows; the Nasdaq recorded
141 new highs and 50 new lows.
(Reporting by Noel Randewich in Oakland, Calif., and by Lisa
Mattackal and Ankika Biswas in Bengaluru; Editing by Pooja Desai and
David Gregorio)
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