Traders work on the floor at the New York Stock Exchange (NYSE) in New York City, U.S., June 14, 2024. REUTERS/Brendan McDermid
Brendan Mcdermid | Reuters
The S&P 500 retreated on Wednesday as the rotation out of high-flying technology shares continued.
The broad index traded 1% lower, while the Nasdaq Composite slid 1.7%. The Dow Jones Industrial Average flickered around its flatline, last up about 0.1%.
Apple, Meta, Netflix and Microsoft all dropped more than 1%. That offered the latest sign of investors pulling back on megacap technology after the group’s monster run this year as artificial intelligence captured the market’s interest.
Semiconductor stocks struggled in particular within the tech sector following a Bloomberg News report that the Biden administration is considering tougher trade restrictions if companies continue granting China access to U.S.-made technology.
The VanEck Semiconductor ETF (SMH) fell nearly 4% following the report. Nvidia and U.S.-listed shares of Taiwan Semiconductor lost around 4% and 2%, respectively.
The Russell 2000 pulled back on Wednesday, placing the small cap benchmark on track to snap a five-day winning streak. Still, the index has climbed more than 10% over the last five trading days as the market rally broadened out, while the tech-heavy Nasdaq has shed more than 1% in the same period.
This rotation comes as traders have become more optimistic on interest rate cuts, which should benefit small caps and companies with higher financing costs. Fed funds futures trading implies a 100% likelihood the Federal Reserve will lower rates in September, according to the CME FedWatch tool.
“The Dow has spent most of the past two years lagging the S&P 500 index,” said Chris Zaccarelli, chief investment officer of Independent Advisor Alliance. “But it has new wind in its sails this summer on the hopes that the market rally will broaden from a narrow set of technology companies into a broader array of companies throughout the economy.”
