The S&P 500 and Nasdaq Composite ended lower on Thursday in fickle trading, ultimately failing to regain ground lost during the previous day’s tech-triggered sell-off.
The Dow Jones Industrial Average soared as much as 500 points after stronger-than-expected GDP data provided support, before closing up 81.20, or 0.2%, at 39,935.07. The Nasdaq fell 0.9%, while the S&P 500 was down 0.5%.
Small-cap stocks also rose as investors sought out value away from the megacaps. The small-cap Russell 2000 jumped 1.3%, partially recouping the losses from Wednesday’s broad Wall Street sell-off.
Megacap stocks endured a volatile day. Amazon, Apple and Nvidia all declined between 0.5% and 1.7%.
While, Alphabet’s shares were down 3%, Tesla was up 2%.
Lackluster earnings from the Google parent and the EV maker had pummeled the so-called “Magnificent Seven” group of tech stocks on Wednesday, prompting the Nasdaq and the S&P 500 to log their worst day since 2022.
Data showed the US economy expanded 2.8% in the second quarter, versus an estimate of 2%, but inflation subsided, leaving expectations of a September Fed rate cut intact.
“I think the market is kind of lurching,” said Yung-Yu Ma, chief investment officer at BMO Wealth Management. “The concern had been building and yesterday was a bit of a crescendo of that concern, but some of that has been alleviated today.”
Bets of a 25-basis-point cut by September stood at 85.8%, from around 78% prior to Thursday’s data, according to CME’s FedWatch Tool.
Market participants are also pricing in at least two rate cuts by December this year, according to LSEG data.
Investors are now watching for the personal consumption expenditures price data on Friday, to confirm bets of an early start to interest-rate cuts after the recent trend of easing inflation and some weakness in the labor market.
While the group of heavyweight stocks has powered the markets to all-time highs this year, Wednesday’s sell-off added weight to fears that these stocks might be over-stretched and in for more turbulence.
“The companies that have done well with high interest rates and AI enthusiasm are starting to struggle. Other (lagging) indexes that are more diversified to benefit from interest rates coming down,” Klimke said.
Semiconductor stocks also broadly fell, led by an 13% tumble in Teradyne after the maker of chip-testing equipment forecast lower-than-expected third-quarter revenue.
Among results-driven moves, IBM jumped 4.3%, also boosting the blue-chip Dow, after beating estimates for second-quarter revenue and raising the annual growth forecast for its software business.
Ford slumped 18% after the automaker’s second-quarter adjusted profit missed estimates by a wide margin, while American Airlines rose 4.2%, despite cutting its annual profit forecast.
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