(Bloomberg) — The world’s largest technology companies extended losses in late hours as Microsoft Corp.’s results fueled concern the artificial-intelligence frenzy that has powered the bull market might have gone too far.
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A $280 billion exchange-traded fund tracking the Nasdaq 100 (ticker: QQQ) got hit as the software maker plunged 6% amid slower cloud growth. The results overshadowed Advanced Micro Devices Inc.’s solid outlook. Intel Corp. rose on plans to cut thousands of jobs to reduce costs. All that will set the scene for earnings from other technology heavyweights, with markets also gearing up for Wednesday’s Federal Reserve decision.
A rotation out of big tech has dragged the Nasdaq 100 down 9% from its all-time high — leaving it on the cusp of a correction. The shift into cyclical pockets of the market began in earnest after signs of cooling inflation stoked bets the Fed will cut rates in September.
“If the Fed does not signal a September rate cut, markets could get a bit ugly given recent tech weakness — especially if earnings underwhelm,” said Tom Essaye at The Sevens Report.
The S&P 500 fell to around 5,435. The Nasdaq 100 slid 1.4%. A gauge of the “Magnificent Seven” megacaps sank 2%. The Russell 2000 of small firms rose 0.3%. Nvidia Corp. tumbled 7%, wiping $193 billion from its market value.
Bonds and gold climbed amid a flare-up in geopolitical risks. Israel’s military struck Beirut, aiming at a Hezbollah commander. Oil remained lower. Bank of Japan Governor Kazuo Ueda will be under intense scrutiny when he unveils plans for quantitative tightening and a decision on the policy rate.
Goldman Sachs Group Inc.’s chief David Solomon told CNBC that one or two Fed rate cuts later this year are looking increasingly likely. That’s after predicting just two months ago there would be no reductions in 2024.
If the Fed is about to begin a rate cutting cycle, stock bulls have history on their side. In the six prior hiking cycles, the S&P 500 has risen an average 5% a year after the first cut, according to…
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