The technology stock selloff abated slightly in early afternoon trading.
The Nasdaq Composite pared its decline to 1.1%, while the S&P 500 was down 0.6%. The Dow was moving in and out of positive territory, most recently down 84 points, or 0.2%. If it can close 92 points higher, it would lock in its first closing high since Dec.
Market breadth deteriorated slightly and the Dow turned lower after minutes from the Federal Open Market Committee’s late-July meeting showed central bankers growing divided on how to evaluate conflicting economic data.
“Markets are on a three-day losing streak as investors show fatigue following a 30% rally since April,” writes Mark Hackett, chief market strategist at Nationwide. “We’re seeing a notable drop in leadership, with large-cap growth significantly lagging small caps and value this month. Still, the S&P 500 Index sits just 1% below record highs, and volatility and credit spreads remain calm, suggesting investors’ fears are modest.”
Magnificent Seven stocks continued to struggle, along with riskier S&P 500 stocks and growth stocks. The leading strategies included low volatility stocks, dividend stocks, and value stocks.
“We’re on day seven of this momentum unwind,” writes the trading desk team at Jefferies. “The high-beta momentum long/short spread that everyone is referencing is -15% over the past seven days (and red every day).”
They point to underwhelming reactions to a recent wave of tech earnings including CoreWeave, Applied Materials, among others. They also argue the launch of OpenAI’s Chat GPT-5 has gotten negative press.
There wasn’t much happening in markets, aside from the latest wave of retailer earnings reports. Target stock was down 7.3%, though it’s replacing its longtime chief executive amid some company-specific problems.
Intel, Micron Technology, and Dell Technologies rounded out the S&P’s bottom four.
The trading desk team at Jefferies adds that Federal Reserve Chairman Jerome Powell’s speech on Friday may have some on Wall Street nervous, given the event has historically been a negative catalyst.
“This also feels self-fulfilling, similar to the February unwind, where weakness is coming in names that are owned by every type of investor,” they write. “Names like [Palantir], [CoreWeave], [Applovin], [Vertiv] etc are owned by fundamental [hedge funds], macro funds, retail, asset managers, etc etc etc. So this feels similar to February where the catalyst for the sell-off is price action, and it builds on itself.”