The S&P 500 and Nasdaq Composite fell on Wednesday as investors shifted away from high-flying technology stocks towards more rate-sensitive sectors. The broad S&P 500 dropped 1.39 per cent to close at 5,588.27, while the tech-heavy Nasdaq declined 2.77 per cent to finish at 17,996.92, marking its worst session since December 2022 and its first close below 18,000 since July 1. In contrast, the Dow Jones Industrial Average gained 243.60 points, or 0.59 per cent, to end at 41,198.08, achieving its first-ever close above 41,000.
A roughly 4.5 per cent increase in UnitedHealth, driven by a Wall Street upgrade following strong earnings, helped boost the 30-stock index. This builds on Tuesday’s rally of over 700 points, the blue-chip index’s best day in more than a year. Meanwhile, the S&P 500 and Nasdaq were weighed down by a continued decline in megacap technology stocks, a shift from their significant gains earlier this year fuelled by the artificial intelligence boom.
Notably, Wednesday’s session was the first since 2001 where the Nasdaq posted a loss exceeding 2.5 per cent while the Dow recorded a gain. Within the S&P 500, the information technology and communication services sectors were the worst performers. Meta Platforms fell 5.7 per cent, while Netflix and Microsoft each declined more than 1 per cent, and Apple slid 2.5 per cent.
Semiconductor stocks also struggled following a Bloomberg News report that the Biden administration might impose stricter trade restrictions if companies continue providing China with access to U.S.-made technology. The VanEck Semiconductor ETF (SMH) dropped over 7 per cent, its worst day since March 2020, with Nvidia and U.S.-listed shares of Taiwan Semiconductor falling more than 6 per cent and nearly 8 per cent, respectively.
The Russell 2000 slipped 1 per cent, ending a five-day winning streak, though it has climbed over 9 per cent in the past five trading days as the market rally broadened. In contrast, the Nasdaq has lost more than 3 per cent during the same period amid the tech sell-off. This rotation reflects traders' growing optimism about interest rate cuts, which are expected to benefit small caps and companies with higher financing costs. According to the CME FedWatch tool, Fed funds futures trading suggests a high likelihood that the Federal Reserve will lower rates in September.
Futures
The SPI futures are pointing to a 0.54 per cent fall.
Currency
One Australian dollar at 7.30am was buying 67.28 US cents.
Commodities
Gold has lost 0.42 per cent. Silver has lost 3.44 per cent. Copper has dropped 0.92 per cent. Oil has gained 2.59 per cent.
Figures around the globe
European markets closed mixed. London’s FTSE added 0.28 per cent, Frankfurt lost 0.44 per cent, and Paris closed 0.12 per cent lower.
Turning to Asian markets, Tokyo’s Nikkei lost 0.43 per cent, Hong Kong’s Hang Seng added 0.06 per cent while China’s Shanghai Composite closed 0.45 per cent lower.
Yesterday, the Australian share market closed 0.73 per cent higher at 8057.89.
Sources: Bloomberg, FactSet, IRESS, TradingView, UBS, Bourse Data, Trading Economics, CoinMarketCap, Marketech.
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