S&P, Nasdaq end lower in volatile trade, megacap trend uncertain By Reuters
Written by David French
(Reuters) – The volatile session ended the volatile session weak on Thursday, failing to regain ground lost in the previous day's technology-driven sell-off as investors blamed megacaps for not looking at them.
It depends on early gains to close higher on stronger-than-expected US domestic product data.
Smaller stocks also rose as investors sought value away from megacaps, with a 1.3% gain to recover part of Wednesday's losses.
Megacap stocks recovered from a shaky start to trade higher by mid-afternoon but mostly slipped later, with Meta Platforms (NASDAQ: ) Microsoft (NASDAQ: ) and Nvidia (NASDAQ: ) ending between 1.7% and 2.4 % down.
Shares of Alphabet (NASDAQ: ) fell for a second straight day, falling 3.1% to their lowest close since May 6, but Tesla (NASDAQ: ) rose. Lackluster earnings from the parent of Google and the electric car maker hammered the so-called Magnificent Seven of stocks on Wednesday, prompting the Nasdaq and S&P 500 to record their worst day since 2022.
The Cboe Volatility Index, known as Wall Street's gauge, extended its recent gains to close at 18.46, a new 14-week high.
“I think the market is a luxury,” said Yung-Yu Ma, chief investment officer at BMO Wealth Management. “Anxiety has been building and yesterday was a little bit of that anxiety, but some of it has subsided today.”
While investors are still trying to deal with Wednesday's disappointing currency reports, as well as political and economic uncertainty, Ma said that the latest data ultimately shows a strong US economy.
Thursday's GDP report showed that the US economy grew by 2.8% in the second quarter compared to the average of 2%. Inflation eased, leaving expectations for a September interest rate cut by the Federal Reserve.
All eyes are now on Friday's personal consumption expenditure price data to confirm the first early bet on the Fed's rate cut.
While heavyweight stocks have powered the market to record highs this year, Wednesday's sell-off reinforced fears that these stocks may be overextended and in deep trouble.
This concern has fueled value investors, accelerating their rotation into small-cap stocks and other sectors outside of megacap technology.
The S&P Small Cap 600 rose 1.4% on Thursday.
The S&P 500 lost 27.91 points, or 0.51%, to 5,399.22, while the Nasdaq Composite fell 160.69 points, or 0.93%, to 17,181.72. The Dow Jones Industrial Average rose 81.20 points, or 0.20%, to 39,935.07.
Among the revenue-driven measures, IBM (NYSE: ) shares jumped 4.3%, and boosted the blue-chip Dow, after the technology company beat second-quarter revenue estimates and raised a full-year growth forecast for its software business.
American Airlines (NASDAQ: ) rose 4.2% after cutting its annual profit forecast. Southwest Airlines (NYSE: ) rose 5.5% after it said it will implement changes that include eliminating open seats and offering seats with more legroom.
Advances in airlines and logistics companies, Old Dominion up 5.7% and JB Hunt up 4.3%, helped Average gain 1.3%.
Ford (NYSE: ) fell 18.4% after the automaker's second-quarter adjusted profit beat estimates by a wide margin. Edwards Lifesciences (NYSE: ) fell 31.3% after missing second-quarter revenue estimates.
Volume on US exchanges was 13.23 billion shares, compared to the 11.60 billion average for the full session over the last 20 days.
