Technology-led stock sell-offs extended into a second day onTuesday as the market continued to rotate into assets that have underperformedover the past few years. This rotation has been taking place on multiplelevels. There has been a shift out of software and technology into moreconventional sectors that are more closely tied to everyday life. From aquantitative strategy perspective, there has also been a rotation out of growthand momentum into value. Smaller companies’ stocks were on the rise, whilelarger companies’ stocks retreated.
The Dow Jones Industrial Average, an index that is relatively lessrepresented by AI and software, rose 260 points to 49,501. The NASDAQ, atechnology-heavy index, retreated 1.77% to 24,891. The S&P 500, generallyconsidered a balanced index, declined by 0.51% to 6,883. The Russell 2000, anindex representing smaller firms, lost 0.9%. The decline in the overall marketwas not broad-based, as 7 out of 11 sectors posted gains, while only thetechnology sector posted significant losses.
The bond market held steady today, with both the 5-year U.S.Treasury yield and the 10-year yield largely unchanged at 3.83% and 4.28%,respectively.
We got a glimpse of the economy as the ADP employment report camein below expectations, while a service industry gauge came in aboveexpectations and remained in expansionary territory. These two reports providedcontradictory directional guidance for the economy. While some commentary fromthe service report suggested that a wave of optimism may be forming, othersnoted that prices appear to be leveling off. Only a few more data points willhelp inform where the economy is headed.
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