Investors reduce tech positions and take profits, leading to declines in major stock indexes on Thursday
Stocks declined on Thursday as investors continued to reduce positions in high-flying technology stocks and took profits from recent gains in other sectors, according to CNBC.
The Dow Jones Industrial Average fell 533.06 points, or 1.29 percent, closing at 40,665.02. The S&P 500 dropped 0.78 percent to end at 5,544.59. The technology-heavy Nasdaq Composite lost 0.70 percent, closing at 17,871.22.
Thursday saw further selling of megacap tech stocks, a trend observed in recent days. The growing likelihood of a September interest rate cut from the Federal Reserve has bolstered optimism in the broader market.
This benefits small caps and cyclical names, which are seen as bigger beneficiaries of lower borrowing costs. However, these names also experienced declines following notable gains.
This shift away from tech peaked on Wednesday when the Nasdaq had its worst daily performance since December 2022. Wednesday also marked the first session since 2001 where the Nasdaq posted a loss exceeding 2.5 percent, while the blue-chip Dow registered a gain.
Thursday’s sell-off was broader than just the tech sector. Ten out of the 11 sectors in the S&P 500 traded lower, and nine out of every ten Dow members saw losses. The small-cap-focused Russell 2000, which had surged amid expectations for interest rate cuts, dropped about 1.9 percent.
“There’s some profit-taking,” said Keith Buchanan, senior portfolio manager at Globalt Investments. “I kind of cringe a bit if the profit-taking occurs five days into a trade, but that just shows us the magnitude of what we’ve seen as far as the rotation.”
Despite Thursday’s declines, the Russell 2000 has jumped 3.5 percent in the last five trading days. However, the Nasdaq has slipped about 2.3 percent in the same period, highlighting the trend of traders rotating out of tech.
With Thursday’s moves, the Dow was the only major index tracking for week-to-date gains, advancing more than 1 percent. The Russell 2000 has risen more than 2 percent for the week.
The S&P 500 has declined more than 1 percent since the start of the week, while the Nasdaq Composite has fallen almost 3 percent amid the tech sell-off.
“Obviously, Fed easing rates is going to be good for small businesses,” said Charlie Ripley, senior investment strategist at Allianz. Meanwhile, there’s “some prudence and profit-taking with the tech trade that’s been so profitable this year.”
