FX.co ★ U.S. Stocks Seeing Significant Weakness As Early Buying Interest Evaporates

On Thursday, stocks posted substantial losses throughout the trading day, retracting gains from the previous session's rally. The Nasdaq and the S&P 500 fell firmly into the negative after touching record intraday highs in early trading.

As of now, the Nasdaq has dropped 341.52 points, or 1.8%, to 18,305.93, while the S&P 500 has fallen 50.81 points, or 0.9%, to 5,583.10. Conversely, the narrower Dow has hovered near the unchanged line for most of the day and is currently up by 27.29 points, or 0.1%, at 39,748.65.

Initial optimism about the outlook for interest rates spurred early strength on Wall Street, but buying interest diminished shortly after trading commenced. It appears traders perceived the increased confidence in a September rate cut as already factored into the markets following yesterday's rally. Consequently, some traders engaged in profit-taking, particularly in leading tech stocks like Nvidia (NVDA), which had seen significant gains this year.

Despite the pullback, the Federal Reserve is still anticipated to lower rates in September. This forecast is supported by a Labor Department report showing a slight, unexpected decrease in U.S. prices for June. The consumer price index (CPI) dropped by 0.1% in June after remaining unchanged in May, contrary to economists' expectations of a 0.1% increase.

This decline in consumer prices was driven by a steep drop in gasoline prices, which outweighed continued rises in shelter costs. Excluding food and energy, core consumer prices inched up by 0.1% in June, following a 0.2% increase in May, also below the expected 0.2% rise.

The report further noted that the annual rate of consumer price growth slowed to 3.0% in June from 3.3% in May. Economists had forecasted a deceleration to 3.1%. Similarly, the annual core consumer price growth slowed to 3.3% in June from 3.4% in May, contrary to expectations of no change.

"Today's CPI release should offer more confirmation for the data-dependent—and hesitant—Fed to begin the interest rate easing cycle at its September 18 meeting," stated Quincy Krosby, Chief Global Strategist for LPL Financial.

### Sector News

Semiconductor stocks have notably declined during the session, retracting from recent sector strengths. The Philadelphia Semiconductor Index plunged by 3.1%, pulling back from its record closing high set on Wednesday. Software and computer hardware stocks also saw significant declines, contributing to the Nasdaq's sharp drop.

Conversely, housing stocks demonstrated substantial strength due to optimism regarding lower interest rates, which resulted in a 5.1% surge in the Philadelphia Housing Sector Index. Likewise, gold stocks experienced considerable gains, as indicated by the NYSE Arca Gold Bugs Index's 2.6% increase, driven by a sharp rise in precious metal prices.

Interest rate-sensitive sectors, including commercial real estate, telecom, and utilities, also showed significant strength. Biotechnology stocks moved upwards strongly as well.

### Other Markets

Internationally, stock markets across the Asia-Pacific region mostly advanced on Thursday. Japan's Nikkei 225 Index increased by 0.9%, while China's Shanghai Composite Index rose by 1.1%, and Hong Kong's Hang Seng Index jumped by 2.1%.

European markets also moved higher, with the U.K.'s FTSE 100 Index increasing by 0.4%, France's CAC 40 Index climbing by 0.7%, and Germany's DAX Index also rising by 0.7%.

In the bond market, treasuries surged in response to the consumer price inflation data, causing the yield on the benchmark ten-year note to drop by 8.9 basis points, settling at 4.190%.