Nasdaq, S&P 500 Fall as Tech Tumbles; Russell 2000 Rallies

The Nasdaq Composite and S&P 500 fell Thursday as shares of big tech companies and airlines tumbled, while shares of other sectors that stand to benefit from lower interest rates rose on growing expectations that the Federal Reserve could soon cut its benchmark rate.

Major stock indexes fell Thursday as shares of big tech companies and airlines tumbled, while shares of other sectors that stand to benefit from lower interest rates rose on growing expectations that the Federal Reserve could soon cut its benchmark rate.

The Nasdaq Composite was down 1.7% in late trading, while the S&P 500 fell 0.8%. The declines threaten to end a seven-session winning streak for the two major indexes, which have hit a series of record highs since the start of the month. The Dow Jones Industrial Average was up 0.1% Thursday.

In sharp contrast, the Russell 2000 index of smaller companies was up more than 3%.

The recent rally for major indexes has been fueled by the strong performance of tech stocks and hopes the Fed will cut its influential fed funds rate as soon soon as September.

On Thursday, however, tech stocks were leading the Nasdaq lower. AI investor darling Nvidia (NVDA) was down about 4%, and shares of Meta Platforms (META), Apple (AAPL) and Intel (INTC) were also lower.

Tesla (TSLA), which has finished higher for 11 consecutive sessions, was the biggest S&P 500 decliner, down more than 7%, following a Bloomberg report that the EV maker would delay its eagerly awaited robotaxi debut event to October from August.

Airlines fell sharply after Delta (DAL) reported weaker-than-expected earnings and lowered its guidance. Shares of United (UAL), American (AAL) and other carriers fell as well.

The major indexes had moved higher early in Thursday's session after a government report showed that consumer prices surprisingly fell in June from the previous month, adding to expectations that the Fed will start cutting the federal funds rate soon. The Fed has said it's waiting for more evidence that inflation is under control before easing policy, and Thursday's report likely falls into that category.

Traders are now pricing in about a 93% chance that the Fed will start cutting interest rates in September, according to the CME Group’s FedWatch tool, which forecasts rate movements based on fed funds futures trading data. That's up from a 73% likelihood of a cut that was being priced in yesterday.

While tech stocks slid, several sectors were on the rise thanks to the rate-cut optimism, notably homebuilders and real-estate companies. Big gainers included D.R. Horton (DHI), Pultegroup (PHM) and Lennar (LEN) and Alexandria Real Estate Equities (ARE).

The yield on 10-year Treasurys fell to below 4.2% after the CPI release, down from near 4.3% before the report and at the lowest level since March. Gold was trading around $2,420 at its highest levels since March.