Thursday was a strange day for the stock market. this may be good news | Wilnesh News

Market trends shifted dramatically on Wall Street on Thursday, with rising and falling stocks swapping positions for the day. As it turns out, that might be just what the stock market needs to continue rising.

this Russell 2000 The small-cap index, which has struggled to find its footing all year, rose more than 3% on Thursday. Meanwhile, every stock in the so-called “Magnificent 7” fell, including more than 5%. Nvidia down 2.3% applewhich drags down both sides S&P 500 Index and Nasdaq Index.

Bespoke Investment Group shares two statistics Social Media Sites X To demonstrate how rare such splits are.

• Thursday marked the second day since 1979 when the Russell 2000 rose more than 3% while the S&P 500 fell.
• The Nasdaq underperformed the Russell 2000 by more than 5 percentage points, appearing to be its largest daily differential on record. The only time the gap was more than 5 percentage points was in November 2020, when Pfizer shared positive results from its Covid-19 vaccine trial.

While major market averages and many individual 401k accounts may be down on the day, this odd result could be a positive sign for the market. The recent rally has been largely driven by Big Tech companies, leading investment professionals to worry about a small group of stock market leaders.

“Today is a big day,” Yardeni Research’s Ed Yardeni said on CNBC’s “Closing Bell.” I don’t think this will continue to pull the S&P 500 down – I think there will be enough money to keep the leading stocks that are doing well pretty elevated, but I think we will see more gains in the S&P 493 as well as the small and mid-cap stocks stocks,” he added.

The spin-off deal comes after a June consumer price index report released earlier on Thursday showed headline inflation fell last month and is now up about 3% over the past year. This boosts confidence that the Fed will begin cutting interest rates as early as September. Federal Reserve Chairman Jerome Powell said in testimony before Congress this week that the central bank realizes that keeping interest rates high for an extended period of time could harm the economy.

“Investors are rotating: they’re moving away from large tech stocks and toward small and mid-cap stocks, as well as real estate,” Sam Stovall, chief investment strategist at CFRA Research, told CNBC. “What they’ve been waiting for may not be a guarantee, but it’s certainly confirmation that the Fed may start cutting interest rates. , and this is not done in response to a recession.”

Activity in bond markets supports this idea. U.S. Treasury yields fell across the board on Thursday, meaning government bond prices are rising.

“The consumer price index (CPI) is positive, driven by a slightly dovish Powell,” Baird investment strategist Ross Mayfield told CNBC. “Interest rates are down significantly, And there’s some kind of rotation trade, but the problem with the market being so concentrated in big tech is that rotation trade can look like a negative on the surface,” he said.

To be sure, there have also been signs in recent months that the U.S. economy is weakening. A slow-growth or recessionary environment will be tough for small-cap stocks, as they tend to be more economically sensitive and domestically oriented than larger companies.

—CNBC’s Sarah Min and Alex Harring contributed reporting