[New York Stock Market] Technology Stocks Fall Together on Profit-Taking... Dow Also Down 0.78%

Investors Realize Gains on Tech and Small-Cap Stocks
US Weekly New Unemployment Claims Exceed Expectations

The three major indices of the U.S. New York stock market all closed lower on the 18th (local time). Investors engaged in profit-taking, leading to continued selling pressure on both tech stocks and small- and mid-cap stocks.

On that day at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average, which focuses on blue-chip stocks, closed at 40,665.02, down 533.06 points (1.29%) from the previous trading day. The S&P 500, centered on large-cap stocks, also fell 43.68 points (0.78%) to 5,544.59, and the tech-heavy Nasdaq index closed at 17,871.22, down 125.7 points (0.7%).

With expectations rising for a rate cut in September, investors have been rotating from large tech stocks to small- and mid-cap stocks, continuing the downward trend in tech stocks. By individual stocks, Apple fell 2.05%. Microsoft (MS) dropped 0.71%, while Alphabet, Google's parent company, and Amazon declined 1.86% and 2.22%, respectively. Netflix, which reported earnings after the market close and added 8.05 million subscribers in Q2, exceeding market expectations, is down 1.42% in after-hours trading. It fell 0.68% during regular trading hours.

Small- and mid-cap stocks, which had seen buying momentum, also experienced profit-taking by investors on this day, with the Russell 2000 index dropping 1.85%. The Russell 2000 had surged 7% over the past five trading days.

Case Buchanan, Senior Portfolio Manager at Globalt Investments, said, "There is some profit-taking," adding, "If profit-taking occurs after just five trading days since the start of trading, it might cause a slight pullback, but this shows the scale of the rotation we have seen so far."

Charlie Ripley, Senior Investment Strategist at Allianz, analyzed, "Clearly, the Federal Reserve's easing of interest rates will be favorable for small businesses," and added, "Regarding this year's trading of highly profitable tech stocks, there is some caution and profit-taking."

The unemployment claims data released that morning signaled a cooling labor market. According to the U.S. Department of Labor, new unemployment claims for the week of July 8?14 totaled 243,000, the highest since August 2023. This exceeded both the expert forecast of 229,000 and the revised figure of 223,000 for the previous week. Continuing claims, which count those claiming unemployment benefits for at least two weeks, reached 1,867,000 for the week of June 30 to July 6. This is the highest level since November 2021, surpassing both the market estimate of 1,860,000 and the revised figure of 1,847,000 for the previous week.

Stuart Paul, an economist at Bloomberg Economics (BE), said, "The increase in both continuing and new unemployment claims shows that the labor market is cooling," and predicted, "The unemployment rate will rise throughout the second half of this year, reaching 4.5% by year-end."

Expectations for a Fed rate cut in September are gaining more weight. The market already views a September cut as a done deal. According to the CME FedWatch tool on that day, the federal funds futures market reflects a 98.1% probability that the Fed will cut rates by at least 0.25 percentage points at the September Federal Open Market Committee (FOMC) meeting. The probability of a cut of 0.5 percentage points or more in December is 95.4%.

U.S. Treasury yields are rising. The 10-year U.S. Treasury yield, a global bond yield benchmark, rose 5 basis points (1 bp = 0.01 percentage points) to 4.2%, while the 2-year Treasury yield, which is sensitive to monetary policy, increased 3 basis points to trade around 4.46%.

International oil prices closed flat. West Texas Intermediate (WTI) crude oil fell $0.03 to $82.82 per barrel, while Brent crude, the global oil price benchmark, rose $0.03 to close at $85.11 per barrel.