Renewed tech selloff drags down market.

Renewed pressure | A renewed selloff in the world’s largest tech companies dragged down the stock market, overshadowing economic data that bolstered confidence the Federal Reserve will be able to engineer a soft landing. About 300 companies in the S&P 500 advanced — but the index itself sank below 5,400. While economically sensitive groups such as energy, industrial, and financial shares rose, the tech sector saw renewed pressure. The Russell 2000 climbed 1.3%, while a measure of the “Magnificent Seven” megacaps fell 1.1%. Treasury 10-year yields fell to 4.24%. The US economy grew by more than forecast in the second quarter: GDP increased at a 2.8% annualized rate in the April-June period after rising 1.4% in the previous quarter. The economy’s main growth engine — personal spending — rose 2.3%, also more than projected.

The rotation trade in US stocks pauses.

Big rotation in stocks takes a breather. Photo: Michael Nagle/Bloomberg

Rotation break | A weeklong decline in megacap tech stocks broadened to encompass smaller firms and financial shares as signs of economic weakness overwhelmed optimism over anticipated rate cuts. Almost every major group in the S&P 500 fell, with the benchmark down almost 1%. Conviction the Federal Reserve is poised to ease back on its battle to subdue inflation has prompted a retreat from megacap stocks, which emerged during the tightening cycle as a de-facto safety trade. In turn, money recently flowed to a broader swath of industrial and staples firms for which high financing costs posed a bigger impediment. The Russell 2000 fell about 2% after recently hitting its most-overbought level since 2017. Treasury 10-year yields rose four basis points to 4.20%. The euro dropped.

US inflation broadly cools.

Stock rotation | News that US inflation cooled broadly in June — to the slowest pace since 2021 — sent Treasury yields plunging on Thursday as bets mounted on the prospect for Federal Reserve interest rate cuts this year. In the equity market, that helped drive a rotation out of the tech megacaps that have powered the bull market in stocks. Optimism over lower rates sparked a shift into riskier corners of the market as money exited the safety trade of big tech. Investors are growing increasingly concerned that tech megacaps are spending too much on artificial intelligence, according to Goldman Sachs.

New world order.

Russian leader says Euro-Atlantic security order is ‘outdated.’

Putin's global security plan | Russian President Vladimir Putin laid out his proposal for a new Eurasian security architecture founded on Moscow’s deepening entente with Beijing to challenge the post-Cold War order in Europe dominated by the US and its allies. Russia’s goal is to ensure “indivisible security and development to replace the outdated Euro-centric and Euro-Atlantic models which gave unilateral advantages to individual countries,” Putin said at a security summit in Astana, Kazakhstan, on Thursday. Putin spoke a day after holding talks in Astana with Chinese President Xi Jinping, who reaffirmed Beijing’s position on the invasion despite growing Western frustration over its perceived support for Moscow’s war efforts.