The S&P 500 and Nasdaq Composite Indexes fell on Thursday in choppy trading, but ultimately failed to regain ground lost the previous day in a sell-off in tech stocks.
The Dow Jones Industrial Average surged 500 points, boosted by better-than-expected GDP data, to close at 39,935.07, up 81.20 points, or 0.2%, while the Nasdaq fell 0.9% and the S&P 500 lost 0.5%.
Small-cap stocks also rose as investors sought value stocks from larger stocks. The small-cap Russell 2000 rose 1.3%, clawing back some of the losses from a broad sell-off on Wall Street on Wednesday.
Large-cap stocks endured a volatile day, with Amazon, Apple and Nvidia all falling between 0.5% and 1.7%.
Meanwhile, Alphabet shares fell 3%, while Tesla shares rose 2%.
A group of so-called “Magnificent Seven” tech stocks were hit hard on Wednesday, with the Nasdaq and S&P 500 posting their worst days since 2022, due to weak performance from Google’s parent company and the electric car maker.
Data showed the U.S. economy expanded 2.8% in the second quarter, beating the 2% forecast, while inflation subsided and expectations of a Fed interest rate cut in September remained intact.
“I think the market is a little bit spooked,” said Yun Yu Ma, chief investment officer at BMO Wealth Management. “Concerns are building, and those concerns were a little bit heightened yesterday, but they’ve eased somewhat today.”
According to CME’s FedWatch tool, 85.8% of respondents expect a 25 basis point rate cut by September, up from about 78% before Thursday’s data was released.
According to LSEG data, market participants are pricing in at least two rate cuts by December this year.
Investors are now focusing on Friday’s personal consumption expenditures price data to support the outlook for interest rate cuts to begin soon, given the recent trend of easing inflation and weakness in the labor market.
This string of large-cap stocks has driven the market to record highs this year, but Wednesday’s sell-off added to concerns that they are overinflated and could lead to further turmoil.
“Companies that have been doing well on the back of high interest rates and the craze for AI are starting to struggle, as are other (lagging) indexes that are becoming more diversified to benefit from lower interest rates,” Klimke said.
Semiconductor stocks also fell broadly, with chip-test-equipment maker Teradyne Inc. dropping 13 percent after the company forecast weaker-than-expected third-quarter sales.
In a results-focused move, IBM rose 4.3%, lifting the blue-chip Dow Jones Industrial Average after it reported better-than-expected second-quarter earnings and raised its full-year growth outlook for its software business.
Ford fell 18% after its second-quarter adjusted profit fell sharply short of expectations, while American Airlines rose 4.2% despite lowering its full-year profit forecast.
