Top Line
Big technology stocks fell sharply on Wednesday as part of a broader selling pressure, highlighting a shift in market regimes over the past week as expectations of lower interest rates rise and investors view a Trump presidency as increasingly likely.
On Wednesday, both NVIDIA and Meta shares entered correction territory.
Key Facts
The Nasdaq Composite Index was down 2.4% by 11 a.m. EDT, worse than the S&P 500’s 1.2% drop and the Dow Jones Industrial Average’s 0.2% gain.
The biggest losers on Wednesday were Nvidia (share price down 5%) and Apple (-3%), both of which faced downward pressure following President Joe Biden’s inauguration amid concerns about their key China operations. Reportedly Former President Donald Trump and China’s efforts to restrict access to high-performance semiconductor chips Advertised In an interview with Bloomberg Businessweek, he spoke about the “staggering” prospect of tariffs on Chinese goods. Published Late Tuesday.
The “Magnificent Seven” mega-tech stocks — Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia and Tesla — all fell by more than 1%, wiping more than $400 billion in market capitalization.
The rare slump across the stunning seven, which saw the seven major currencies fall an average of 5.8% over the past week, is the latest evidence of a major repositioning of markets since better-than-expected inflation data on Thursday rekindled bets on a sharp cut in interest rates and began tilting betting odds heavily in Trump’s favour in November’s presidential election.
The Dow Jones Industrial Average is up 3.4% since last Wednesday, while the tech-heavy Nasdaq is down 2.4%. Both have been beaten by a 10% gain in the Russell 2000 index of small-cap stocks, a sign that investors believe lower interest rates will help spur earnings growth across U.S. companies, not just artificial intelligence leaders as has been the case in recent quarters.
The S&P’s energy and financial sectors have each risen 4% over the past week, outpacing declines of 4.4% and 4.7% in information technology and communication services. Gains in banks and oil companies can likely be traced back to President Trump’s policies. promise It deregulates the industry and paves the way for higher profits.
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Amazing facts
This is a resurgence of small-cap stocks, which had long been abandoned. The Russell 2000 recorded its biggest five-day gain on record versus the S&P from last Wednesday through Tuesday. according to To Kevin Gordon, strategist at Charles Schwab.
Main Background
The Russell 2000 index, which tracks 2,000 U.S.-listed companies with market capitalizations of about $1 billion, is up 11% this year after being flat through last Wednesday. expect The Federal Reserve is set to cut interest rates from 23-year highs starting in September, which should boost corporate profits as lending costs fall.Even after a recent breather, big technology companies have been dominant winners in the stock market of late, with the S&P’s information technology and communications sector being the top performer year-to-date, over the past year and over the past five years.
tangent
Nvidia shares are officially in a correction, down more than 10% from last Wednesday’s close. Nvidia shares are still up more than 140% this year, the best return of any S&P listed company for the full year. Meta shares have also been in a correction, dropping 12% last week, but are still up a solid 34% this year.
Chief Reviewer
“It’s not a good idea to make significant adjustments to your portfolio based on who you think will win the next election,” Scott Wrenn, a strategist at Wells Fargo Investment Institute, warned in a client note on Wednesday, pointing to inaccuracies in polls and discrepancies between campaign promises and actual policies.
References
