Tech Stocks Lead Market Pullback as Profit-Taking Hits High-Fliers
Major indexes close lower despite in-line inflation data, as weak forecasts from Dell and Marvell Technology spook investors.
US stock markets finished the week on a downturn, as a significant sell-off in the technology sector dragged major indexes into the red. The Nasdaq 100 Index ($IUXX) bore the brunt of the pressure, closing down -1.22%, while the S&P 500 fell -0.64% and the Dow Jones Industrials dipped -0.20%.
The weakness was primarily triggered by investor reactions to corporate earnings and forward guidance in the semiconductor and hardware sectors. after reporting that its second-quarter data center revenue missed analyst estimates. Similarly, Dell Technologies fell more than 8% after the company reported tighter profit margins on its artificial intelligence servers, sparking concerns about the profitability of the AI boom.
This tech-led retreat occurred despite economic data that seemingly reinforced the case for a near-term interest rate cut from the Federal Reserve. The July Core PCE Price Index, the central bank's preferred inflation gauge, , suggesting inflation remains sticky but not runaway. The market largely interpreted the data as keeping the Fed on track for a September rate reduction, with federal funds futures pricing in an 88% chance of a cut.
However, the positive inflation outlook was not enough to offset the bearish sentiment in tech and other negative economic indicators, including a weaker-than-expected August MNI Chicago PMI. Dovish comments from Fed officials, who signaled support for imminent rate cuts, also failed to lift the market, indicating that investors are currently more focused on profit-taking in high-valuation sectors than on monetary policy.