US stock market: Nasdaq, S&P 500 snap streak of records, fall amid rising rate cut expectations

The S&P 500 and Nasdaq both fell Thursday (July 11), snapping a multiday run of records as investors pivoted towards underbought equities and away from artificial intelligence names. This shift came as the yield on US Treasury bonds fell further amid rising expectations of interest rate cuts following better US inflation data.

The Dow Jones Industrial Average finished up 0.1 per cent at 39,753.75.

The broad-based S&P 500 dropped 0.9 per cent to 5,584.54, while the Nasdaq Composite Index fell 2.0 per cent to 18,283.41, ending a run of seven straight records on the tech-focused index.

Inflation data dictates sentiment

A Labor Department report showed US consumer prices fell unexpectedly in June, with the annual increase being the smallest in a year, bringing the Federal Reserve closer to a September rate cut.

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Wall Street seeks lower interest rates to alleviate the pressure on the economy. However, Fed officials have been stating they want to see “more good data” on inflation before making any moves.

Thursday’s report, which indicated milder price increases than expected from a year earlier for gasoline, cars, and other consumer goods purchased in June, was seen by Wall Street as providing just that.

Lindsay Rosner, head of multi-sector investing at Goldman Sachs Asset Management, commented, “With three inflation prints between this morning and September’s Fed meeting, today’s print was crucial in helping the Fed gain confidence that inflation is still moving in the right direction.”

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Market movers

Among individual companies, Delta fell 3.9 per cent after reporting a 29 per cent drop in quarterly profits to $1.3 billion.

Shares of Tesla tumbled 8.4 per cent, its biggest one-day percentage drop since January, after Bloomberg News reported the company is delaying the launch of its robotaxi by about two months to October.

Microsoft and Amazon each lost more than 2 per cent, Meta Platforms dropped about 4 per cent, and AI chip leader Nvidia shed 5.5 per cent.

Shares of Apple fell 2.3 per cent after hitting a record high on Wednesday.

Bond market dynamics

Following the report’s release, Treasury yields tumbled immediately. The yield on the 10-year Treasury dropped to 4.20 per cent from 4.28 per cent late Wednesday and from 4.70 per cent in April. This significant move in the bond market provides a substantial lift for stock prices.

With inputs from agencies