Why the S&P 500’s Bullish Trend May Be Finished
Stocks are dipping on Wednesday after Tuesday saw the decline of a number of previously rising tech stocks.
Quick overview
- The S&P 500 dropped by 0.11% on Tuesday, while the Dow Jones increased by 0.91% and the Nasdaq fell by 0.82%.
- Investor focus has shifted from tech stocks to healthcare stocks, with UnitedHealth and Merck showing significant gains.
- Concerns over economic contraction and higher inflation have led to a pullback in tech stocks after recent record highs.
- The upcoming nonfarm payrolls report is anticipated to reveal further economic contraction, influencing investor sentiment.
For several days, the S&P 500 ended high, but as Tuesday trading closed off, the stock market index had dropped by 0.11% compared to the previous day.
The stock market had a mixed day Tuesday with the Dow Jones marking an increase of 0.91%. The Nasdaq fell 0.82%, and the S&P 500 lost 0.11%. The investor focus pulled away from tech stocks that had been leading the market for a while and transitioned over to healthcare stocks.
Microsoft (MSFT) and Nvidia (NVDA) both ended the day lower after having record high closings for several days. Microsoft lost 0.48% by the end of the day Tuesday, and Nvidia closed off at a 2.97% loss. Meanwhile, pharmaceutical and health stocks took up their gains, with UnitedHealth (UNH) adding 4.54% for the day and Merck (MRK) gaining 3.35% before trading closed off.
How Wednesday Trading May Shift
Some of the stocks that climbed very high and very fast on Tuesday are likely to pull back as Wednesday trading begins. We are already seeing that kind of behavior from some of the healthcare stocks. They are stabilizing after their surge rather than climbing much higher.
In premarket trading, we are also seeing some of those tech stocks continue to fall, coming down from their days of record highs but not losing all of their gains. This is a shift from where the market has been recently, but what is the cause for this reversal?
The payrolls report for June has confirmed that the hiring sector has contracted. This is a greater contraction than expected, and the market has responded accordingly, with investors fearing the results of slightly higher inflation and a tighter economy.
The payroll processing firm ADP released its report Wednesday, with its chief economist Nela Richardson saying that companies are reluctant to replace the workers they have let go. There appears to be some hesitancy from companies that fear dropping profits, incoming tariffs, and higher inflation.
Nonfarm payrolls are coming on Thursday, and they could show further economic contraction. That is the concern right now, which is why investors are pulling away from numerous stocks, particularly tech ones that are more likely to be hit by economic tightening.
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