The Nasdaq Closes at a Considerably Lower Level as Investors Move Away From the IT Sector

The Nasdaq closed significantly down on Thursday, impacted by declines in Nvidia (NASDAQ:NVDA), Apple (NASDAQ:AAPL), and Tesla (NASDAQ:TSLA).

Investors shifted their focus to smaller companies following the release of inflation data that fell short of expectations, leading to speculation that the Federal Reserve may lower interest rates in September.

The S&P 500 Declined, and the Dow Rose

The S&P 500 also declined following a report from the Labor Department revealing an unexpected drop in U.S. consumer prices in June. This decrease marked the smallest annual increase in a year, bringing the Federal Reserve closer to considering a rate cut in September. The Dow ended the day with slight increases.

Based on data from CME Group’s Fedwatch, interest rate futures indicate a high probability of the Fed reducing rates by its September meeting. Traders now estimate this chance to be over 90%, a significant increase from the previous estimate of about 74% on Wednesday.

Stocks Have Taken a Sharp Downward Flight

In spite of indications of decreasing inflation, the top companies on Wall Street experienced a decline, as Microsoft (NASDAQ:MSFT) and Amazon (NASDAQ:AMZN) both saw a decrease of over 2%. In comparison, Meta Platforms (NASDAQ:META) dropped by approximately 4%.

Tesla experienced a significant decline of 8.4%, marking its largest single-day decrease since January. This decline comes as Bloomberg News revealed that the company has decided to postpone the launch of their robotaxi service by approximately two months, now scheduled for October.

Apple’s stock declined 2.3% following Wednesday’s achievement of a new all-time high. BofA Global Markets has increased its price target for Apple, stating that it anticipates robust iPhone sales fueled by the introduction of innovative AI capabilities.

While more extensive tech-related stocks experienced a decline on Thursday, shares of smaller companies saw a significant rally.

The Russell 2000, a small-cap index that notably underperformed the benchmark index in 2024, surged 3.6% to reach its highest level since March 2022. Investors are optimistic that rate cuts will create a more favorable environment for smaller companies.

“Investors seem to have the impression that the Federal Reserve is prepared to initiate a reduction in interest rates.” And thus they declare, ‘That suffices for me. “I don’t need to wait for them actually to take action,” stated Sam Stovall, the chief investment strategist at CFRA Research.

Trading activity on U.S. exchanges was robust, with a significant 12.6 billion shares changing hands, surpassing the average of 11.5 billion shares traded in the previous 20 sessions.

The S&P 500 experienced a 0.88% decrease, concluding the session at 5,584.54 points.

The Nasdaq experienced a 1.95% decrease, settling at 18,283.41 points, while the Dow Jones Industrial Average saw a slight 0.08% increase, reaching 39,753.75 points.

Thursday’s drop ended the Nasdaq’s impressive seven-day run of reaching new record highs and the S&P 500’s six-day streak of doing the same. This marked a significant decline for the Nasdaq, the largest percentage drop in a single day since April 30.

The S&P 500 Real Estate index experienced a significant surge of 2.7%, which helped to reduce year-to-date losses to just 1%. The communication services and information technology indexes both experienced a decline of over 2%.

Airline Stocks Supported the Downward Trend

Shares of Delta Air Lines (NYSE:DAL) dropped 4% following the company’s announcement of lower-than-anticipated profits for the current quarter. Additionally, other prominent airline stocks experienced a decline, as evidenced by a 2.7% drop in the S&P 500 index for passenger airline companies.

This could be a location where customers are feeling the impact of rising prices. “That’s appearing in the budget for non-essential expenses such as airline tickets,” stated Scott Helfstein, the leader of investment strategy at Global X.

Investors are eagerly anticipating the release of the Producer Price Index data on Friday, as it will provide valuable insights into the direction of inflation. Additionally, they are also keeping a close eye on the second-quarter earnings reports from central banks.

Citigroup experienced a 1.9% decline following a $136 million fine imposed by U.S. bank regulators.

Shares of Conagra Brands (NYSE:CAG) declined by 1.5% following the company’s projection of annual revenue and profit that fell short of expectations.

Advancing issues surpassed falling ones in the S&P 500 with a ratio of 3.7 to 1.

The S&P 500 achieved an impressive 51 fresh peaks and encountered only two instances of decline. Meanwhile, the Nasdaq celebrated a whopping 141 new highs but also experienced 50 cases of decrease.