FX.co ★ U.S. Stocks Come Under Pressure After Reaching New Record Highs

After an initial modest rise, stocks encountered pressure throughout Thursday's trading session. Both the Nasdaq and the S&P 500 have retracted into negative territory after hitting new intraday record highs.

Currently, the Nasdaq has dropped 175.10 points, or 0.9%, to 18,472.35, and the S&P 500 has declined 21.31 points, or 0.4%, to 5,612.60. Meanwhile, the narrower Dow has managed to hold on to a modest gain, up 52.17 points, or 0.1%, at 39,773.53.

Early strength on Wall Street stemmed from a positive reaction to critical inflation data. A report from the Labor Department revealed that consumer prices in the U.S. unexpectedly edged slightly lower in June.

According to the Labor Department, its consumer price index (CPI) slipped by 0.1% in June after remaining unchanged in May. Economists had forecast a 0.1% increase in consumer prices.

This unexpected decline was largely attributed to a substantial drop in gasoline prices, which more than offset a continued increase in shelter costs.

Excluding food and energy prices, core consumer prices inched up by 0.1% in June, following a 0.2% rise in May. Core prices were anticipated to increase by another 0.2%.

The report also indicated that the annual rate of consumer price growth slowed to 3.0% in June from 3.3% in May. Economists had projected a deceleration to 3.1%.

Similarly, the annual rate of core consumer price growth slowed to 3.3% in June from 3.4% in May, with expectations for it to remain unchanged.

The slowdown in annual price growth has bolstered optimism that the Federal Reserve might lower interest rates at its September meeting.

"Today's CPI release further confirms for the data-dependent and cautious Fed that the interest rate easing cycle could begin at its September 18 meeting," noted Quincy Krosby, Chief Global Strategist at LPL Financial. "Nevertheless, the Fed might lower rates even before September if the labor market weakens more rapidly," she added. "Fed Chair Powell has emphasized the Fed's mandate for maximum employment as a potential rationale for lowering rates if needed to support the labor market and, by extension, the broader economy."

Despite the initial optimism, buying interest waned shortly after trading began. Traders might have viewed the enthusiasm for a September rate cut as already factored into the markets, leading to a subsequent wave of profit-taking, especially among some of the year's top tech performers like Nvidia (NVDA).

**Sector News**

Semiconductor stocks are pulling back after recent gains, with the Philadelphia Semiconductor Index falling 1.7% after closing at a record high in the previous session.

Significant weakness is also observed among software stocks, as evidenced by the 1.1% loss in the Dow Jones U.S. Software Index.

Conversely, housing stocks have surged amid optimism about lower interest rates, leading to a 4.5% spike in the Philadelphia Housing Sector Index.

Interest rate-sensitive sectors such as commercial real estate, telecom, and utilities are also experiencing notable gains. Additionally, biotechnology, steel, and oil service stocks have moved higher.

**Other Markets**

In overseas markets, stock indices across the Asia-Pacific region mostly trended higher on Thursday. Japan's Nikkei 225 Index climbed by 0.9%, China's Shanghai Composite Index rose by 1.1%, and Hong Kong's Hang Seng Index surged by 2.1%.

European markets have also risen. The U.K.'s FTSE 100 Index has increased by 0.3%, while the French CAC 40 Index and the German DAX Index have both gained 0.6%.

In the bond market, treasuries have surged in response to the inflation data, causing the yield on the benchmark ten-year note, which moves inversely to its price, to fall by 9.1 basis points to 4.188%.