Technology stocks experienced a significant downturn on Wednesday as investors moved away from the high-performing giants that have driven this year’s robust stock market rally. The Nasdaq Composite index notably dropped 2.8%, marking its most substantial decline since December 2022, while the S&P 500 also registered a loss of 1.4%.
In contrast, the Dow Jones Industrial Average managed to buck the trend by rising 0.6%, achieving another record close and surpassing the 41,000 mark for the first time. This milestone comes exactly two months after first surpassing 40,000.
Among the notable decliners were shares of Nvidia, a prominent tech heavyweight, which slumped 6.6%, and Advanced Micro Devices (AMD), whose shares dropped 10.2%.
The downturn followed reports on Tuesday suggesting that the Biden administration is contemplating increased sanctions on Chinese tech companies and heightened restrictions on semiconductor trade between the US and China. The US Commerce Department declined to provide any official comment on these developments.
Investor sentiment was further influenced by recent economic indicators, including a benign inflation report and stronger-than-expected retail sales data, which have increased speculation for a potential interest rate cut in September. Consequently, there has been a shift towards stocks that typically perform better in a low interest rate environment.
In midday trading on Wednesday, the Russell 2000 index, which tracks small-cap stocks, initially fell but remains up 4.5% for the week.
The so-called “Magnificent Seven” tech stocks, which have been pivotal in driving market gains this year primarily due to advancements in artificial intelligence, experienced significant declines. Microsoft saw its shares fall by 1.3%, Apple slid 2.5%, Amazon declined 2.6%, Alphabet dropped 1.6%, Tesla slipped 3.1%, and Meta Platforms lost 5.7%.
As trading settled at the end of the day, slight fluctuations in stock levels were anticipated.
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