Traders work on the floor at the New York Stock Exchange on June 14, 2024.
Brendan Mcdermid | Reuters
The Nasdaq Composite fell on Thursday, as the technology sector continued struggling amid the market’s rotation on hopes of easing monetary policy.
The technology-heavy index index lost 1.2%. The S&P 500 dropped 0.8%. The Dow Jones Industrial Average slid 250 points, or 0.6%.
The Nasdaq’s underperformance marks a continuation of the broader shift away from tech seen in recent days. Wall Street has dumped shares of artificial intelligence plays as the growing likelihood of a September interest rate cut from the Federal Reserve bolstered optimism in the broader market. On the other hand, that’s largely helped small-cap and more cyclical names, which are seen as bigger beneficiaries of lower borrowing costs.
Information technology stocks also weighed down the broad S&P 500, with the sector tumbling more than 1%. Micron Technology dropped more than 3%, while big tech names Apple and Microsoft respectively slid more than 2% and 1%.
This trend came to a head on Wednesday, when the Nasdaq tumbled 2.8% in its worst day since December 2022. Wednesday also marked the first session since 2001 where the Nasdaq posted a loss exceeding 2.5%, while the blue-chip Dow registered a gain. On the other hand, the Dow was propelled to its first-ever closing level above 41,000 in the session.
The rotation also explains why the small-cap focused Russell 2000 has jumped close to 9% in the last five trading days, despite also sliding in Thursday’s session. By comparison, the Nasdaq has slipped more than 4% over the last week.
“Obviously, Fed easing rates is going to be good for small businesses,” said Charlie Ripley, senior investment strategist at Allianz. Meanwhile, there’s “some prudence and profit taking with the tech trade that’s been so profitable this year.”
In corporate news, Discover Financial popped 2% after its second-quarter results topped expectations. Beyond Meat tumbled close to 11% after The Wall Street Journal reported, citing people familiar, that the meat substitute company is meeting with bondholders to begin discussions about restructuring its balance sheet.
