Tech stocks tumbled on Thursday, dragging down the broader market after the June CPI report showed inflation at 3% year-over-year, cooler than expected. The Nasdaq fell 2%, and the S&P 500 slipped below 5,600. This prompted investors to rotate out of big tech names like Nvidia and Microsoft and into small-cap stocks.
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In contrast, the small-cap Russell 2000 surged 3.6% as investors bet on potential rate cuts boosting these lagging stocks. Smaller companies, sensitive to interest rates, have struggled with the Federal Reserve’s higher rates. The CPI report increased the likelihood of a September rate cut, with some commentators seeing it as almost assured. The Russell 2000 is up 5% in 2024, compared to 18% for the S&P 500.
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