Stocks in the US experienced a significant selloff on Thursday, with Wall Street especially shedding tech stocks. The Dow closed the day down by 533 points, or 1.3%, pulling back from a record high set just the day before. The S&P 500 also fell by 0.8%, while the Nasdaq Composite suffered a 0.7% drop, extending its losses following its worst day since 2022 on Wednesday.
The market correction was seen as inevitable by many, with Louis Navellier, chairman of Navellier & Associates, mentioning in a note that it was overdue. He expressed confidence that the market would regain momentum by the end of earnings season.
Investors have been moving away from the so-called “Magnificent Seven” tech stocks that have been driving the market to record highs throughout the year. This shift in sentiment comes as cooling inflation data and robust retail sales figures have fueled expectations that the Federal Reserve could start tapering its aggressive monetary policies as soon as September.
Small-cap stocks, which typically perform well in a low-interest-rate environment, had been rallying in recent weeks, helping propel the Dow to new highs. However, these gains have been tempered in the last few sessions, with the Russell 2000, which tracks US small caps, falling by 1.8% on Thursday.
Major tech giants such as Nvidia, Microsoft, Meta Platforms, Amazon, Apple, and Alphabet are all set to end the week on a lower note, while Tesla is expected to finish slightly higher.
Tech stocks were further hit this week following reports that the Biden administration is considering imposing additional sanctions on Chinese tech companies and tightening semiconductor trade restrictions between the US and China.
As the stock market settles after the trading day, slight changes in levels are likely to occur.
In summary, the US stock market saw a broad sell-off on Thursday, driven by a significant decline in tech stocks. The market correction was seen as overdue, with investors shifting away from high-flying tech companies towards other sectors. The outlook remains uncertain as concerns over inflation, interest rates, and geopolitical tensions continue to impact market sentiment.