U.S. Stocks Come Under Pressure After Reaching New Record Highs

(RTTNews) - After moving modestly higher early in the session, stocks have come under pressure over the course of the trading day on Thursday. The Nasdaq and the S&P 500 have pulled back into negative territory after reaching new record intraday highs.

Currently, the Nasdaq is down 175.10 points or 0.9 percent at 18,472.35 and the S&P 500 is down 21.31 points or 0.4 percent at 5,612.60, while the narrower Dow is holding on to a modest gain, up 52.17 points or 0.1 percent at 39,773.53.

The early strength on Wall Street reflected a positive reaction to closely watched inflation data, with a report from the Labor Department showing consumer prices in the U.S. unexpectedly edged slightly lower in the month of June.

The Labor Department said its consumer price index slipped by 0.1 percent in June after coming in unchanged in May. Economists had expected consumer prices to inch up by 0.1 percent.

The unexpected dip by consumer prices came as another steep drop by gasoline prices more than offset a continued increase in shelter costs.

Excluding food and energy prices, core consumer prices crept up by 0.1 percent in June after rising by 0.2 percent in May. Core prices were expected to increase by another 0.2 percent.

The report also said the annual rate of consumer price growth slowed to 3.0 percent in June from 3.3 percent in May. Economists had expected the pace of price growth to decelerate to 3.1 percent.

The annual rate of core consumer price growth also slowed to 3.3 percent in June from 3.4 percent in May. The pace of growth was expected to remain unchanged.

The slowdowns by annual price growth added to optimism the Federal Reserve will lower interest rates as soon as its September meeting.

"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," said Quincy Krosby, Chief Global Strategist for LPL Financial.

"Still, the Fed could very well lower rates sooner than September if the labor market softens at a faster clip," she added. "Fed Chair Powell has increasingly invoked the Fed's maximum employment mandate as a rationale for lowering rates if necessary to support the labor market, and hence the economic backdrop."

Buying interest waned shortly after the start of trading, however, with traders potentially seeing the optimism about a September rate cut as priced into the markets following yesterday's rally.

Traders subsequently took the opportunity to cash in on the recent strength in the markets, with some of the biggest tech winners of the year like AI darling Nvidia (NVDA) leading the pullback.

Sector News

Semiconductor stocks are giving back ground following recent strength, with the Philadelphia Semiconductor Index falling by 1.7 percent after ending the previous session at a record closing high.

Notable weakness has also emerged among software stocks, as reflected by the 1.1 percent loss being posted by the Dow Jones U.S. Software Index.

On the other hand, housing stocks have moved sharply higher amid optimism about lower interest rates, resulting in a 4.5 percent spike by the Philadelphia Housing Sector Index.

Interest rate-sensitive commercial real estate, telecom and utilities stocks are also seeing significant strength, while biotechnology, steel and oil service stocks have also moved to the upside.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Thursday. Japan's Nikkei 225 Index advanced by 0.9 percent, while China's Shanghai Composite Index jumped by 1.1 percent and Hong Kong's Hang Seng Index spiked by 2.1 percent.

The major European markets have also moved to the upside on the day. While the U.K.'s FTSE 100 Index has risen by 0.3 percent, the French CAC 40 Index and the German DAX Index are both up by 0.6 percent.

In the bond market, treasuries have moved sharply higher in reaction to the consumer price inflation data. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is down by 9.1 basis points at 4.188 percent.