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
Stocks slid on Wednesday as the rotation out of high-flying technology shares continued.
The S&P 500 traded 1% lower, while the Nasdaq Composite slid 1.6%. The Dow Jones Industrial Average shed 42 points, or 0.1%.
Apple and Tesla dropped 2% and 1%, respectively. 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 3.8% and 6.1%, respectively.
Those moves follow a winning session on Wall Street, with the Dow rallying more than 700 points to a record. Small caps also continued their resurgence, with the Russell 2000 adding 3.5% and notching a five-day winning streak. The iShares Russell 2000 ETF (IWM), which tracks the benchmark, retreated nearly 1%.
“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.”
This broadening market rally is underway 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.
