The main line
Big tech stocks fell on Wednesday as part of a broader sell-off, underscoring last week’s market regime change as lower interest rates loom on deck and investors see a Trump presidency as increasingly possible.
Shares of Nvidia and Meta entered correction territory on Wednesday.
Key facts
The Nasdaq Composite fell 2.4% by 11 a.m. EDT, a bigger loss than the S&P 500’s 1.2% drop and the Dow Jones Industrial Average’s 0.2% gain.
Among the biggest losers on Wednesday were Nvidia (shares down 5%) and Apple (-3%) — both of which faced downward pressure over concerns about their core units in China after President Joe Biden reportedly moved to curb China’s access to the top. semiconductor chips and former President Donald Trump expressed the “phenomenal” prospect of tariffs on Chinese goods in an interview with Bloomberg Businessweek published late Tuesday.
All of the “magnificent seven” megacap tech stocks Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia and Tesla fell more than 1%, shedding more than $400 billion in total market value.
The rare drop in the Great Seven, with the septet below an average of 5.8% over the past week, is the latest evidence of a major market repositioning since Thursday’s better-than-expected inflation data reignited bets of significantly lower interest rates and betting odds began to rise. heavily favor Trump in the November presidential election.
Since last Wednesday, the broader Dow is up 3.4% compared with the tech-focused Nasdaq’s 2.4% decline, both beaten by the Russell 2000’s 10% gain, evidence that indicates investor confidence that lower rates could help spur earnings growth across corporate America, not just a handful of AI leaders as has been the case in recent quarters.
The S&P’s energy and financials sectors rose 4% each over the past week, beating the 4.4% and 4.7% declines in information technology and communications services, with rallies by banks and oil companies likely to follow. Trump’s promises of easier regulation in the industry, opening the door to higher profits.
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Surprising fact
It’s a renaissance for long-abandoned small caps: The Russell 2000 posted its best five-day stretch against the S&P ever from last Wednesday through Tuesday, according to Charles Schwab strategist Kevin Gordon.
Key background
The Russell 2000, which tracks 2,000 U.S. public companies with an average market value of about $1 billion, is up 11% year-to-date, from a flat return through last Wednesday. Traders now expect the Federal Reserve to cut interest rates from a 23-year high that hit in September, which will help corporate earnings as loans grow less. Even after the last gasp, big tech remains arguably the biggest recent stock market winner, with the S&P’s information and communications technology sectors the top-performing components on an annualized, 1-year and 5-year basis. year.
tangential
Nvidia stock just officially entered correction territory, with shares down more than 10% from its close last Wednesday. Shares of Nvidia are still up more than 140% this year, the best return of any S&P-listed company for the entire year. Meta stock also hit a correction, down 12% over the past week, but is still up a strong 34% this year.
Chief critic
“It’s a bad idea to make meaningful portfolio adjustments based on who you think is going to win the next election,” Wells Fargo Investment Institute strategist Scott Wren warned in a note to clients Wednesday, noting the missteps of voting and differences in campaign promises versus actual ones. politics.
Further reading