Stock indices posted losses as we entered July, as AI-related stocks experienced some profit-taking. Investors rotated out of technology stocks, which had posted substantial gains over the past few months, and shifted positions into other sectors.
The Dow, a relatively defensive index, remained virtually unchanged at 52,305. The NASDAQ, a technology-heavy index, ended the day 0.66% lower at 26,040. The S&P 500 fell 0.22% to 7,483. The technology sector posted a loss of 2.57%, leading the market's decline. However, the communication services sector gained 2.44% after Meta announced plans to sell AI compute capacity. In terms of market themes, AI infrastructure providers, such as chipmakers and electrical component manufacturers, posted losses, while most other large-cap stocks advanced.
The bond market also experienced a selloff as investors focused on remarks from the new Fed Chair, Kevin Warsh, who vowed to change how the Federal Reserve operates by reducing forward guidance and seeking to restore a higher risk premium in the market. He also aims to shift the central bank's primary role back to managing short-term interest rates rather than relying on forward-looking policy messaging. The 5-year Treasury yield rose 5 basis points to 4.24%, while the 10-year Treasury yield increased 6 basis points to 4.48%.
Meanwhile, economic data challenged some of the market's convictions from yesterday. June's private payrolls report came in significantly below expectations, while manufacturing activity expanded more slowly than expected. In addition, the Atlanta Fed's GDPNow estimate for second-quarter GDP came in significantly below expectations.
Tomorrow brings the U.S. jobs report, one of the most closely watched economic releases. It will also be the last trading day of the week. Adams Wealth Advisors will continue to keep you updated.