Tech stocks falter after run to record highs
Technology stocks lead US market declines whilst economically sensitive sectors provide support amid mounting trade tensions.
Tech momentum unwinds after weeks of gains
The Nasdaq 100's 0.82% decline to 20,202.89 marked a retreat from recent highs, as investors took profits following an extended period of outperformance. The NYFANG index's 1.8% drop highlighted just how concentrated the selling pressure had become amongst the market's largest technology names.
Tesla's 5.4% plunge exemplified the volatility that can emerge when political rhetoric meets market momentum. President Trump's threat to eliminate federal subsidies for Elon Musk's companies reignited concerns about policy unpredictability affecting individual stocks.
The Dow Jones' 0.91% gain to 44,494.94 demonstrated that not all sectors were caught up in the technology selloff. Materials and small-cap stocks provided the backbone for the blue-chip index's advance, suggesting a rotation into more economically sensitive areas.
The Dow Transportation index's 2.9% surge represented its best single-day performance since mid-May. As a widely watched economic barometer, this strength suggested that investors were positioning for potential benefits from fiscal stimulus measures.
Trade deadline creates market uncertainty
Trump's confirmation that he won't extend the 9 July deadline for trade negotiations has intensified market focus on potential outcomes. Early indications suggest India may secure an agreement, whilst Japan appears less optimistic about reaching terms.
The scramble to finalise deals within such a compressed timeframe has created an environment where headlines can trigger sharp market moves. This type of event-driven volatility requires careful risk management and position sizing.
Currency markets have been particularly sensitive to trade developments, with the US dollar approaching 3½-year lows against major currencies. The euro's 14% gain this year reflects both dollar weakness and expectations of policy divergence.
Federal Reserve maintains patient approach
Jerome Powell's reiteration of the Federal Reserve's (Fed) wait-and-see stance on interest rates provided clarity on monetary policy direction. Despite political pressure for immediate cuts, the central bank appears committed to assessing tariff impacts on inflation before making moves.
Money markets are pricing just a 21% probability of a July rate cut, with about 64 basis points of cuts expected by year-end. This cautious pricing reflects uncertainty about both economic data and policy implementation.
Looking ahead to key developments
Asian markets continued the cautious tone overnight, with Japan's Nikkei 225 falling 0.78% as technology weakness spread globally. The correlation between US and Asian technology stocks suggests this theme may persist in the near term.
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