Tech Stocks Hit in Late Trading After Micron Outlook Disappoints

Tech stocks took a hit in late US trading as Micron Technology Inc.’s outlook fell short of expectations, causing a ripple effect in the market. The Nasdaq 100 slipped, and chipmakers like Nvidia Corp. were dragged down as well. The Federal Reserve’s announcement that the biggest US banks passed the stress test provided some relief, but concerns about market breadth and reliance on big tech lingered.

David Bahnsen of The Bahnsen Group commented, “The stock market is way too reliant on big tech — period and end of story.” The S&P 500 edged up, with FedEx Corp. surging on a bullish forecast and Amazon.com Inc. reaching a $2 trillion valuation. Treasury 10-year yields topped 4.3%, and the dollar hit its highest level since November.

Craig Johnson at Piper Sandler warned, “The market’s ‘Engine Warning Light’ is on as we head into the hot summer months.” Jack Ablin at Cresset noted the performance disparity among S&P 500 stocks based on capitalization, with larger stocks outperforming. Ablin expects US equity markets to broaden later in the year as the possibility of lower rates comes into focus.

Bloomberg Intelligence’s sector rotation model suggests that energy, health care, and financials could lead the index in the second half of the year. Ryan Grabinski at Strategas highlighted the importance of the “Magnificent Seven” megacaps in driving S&P 500 growth, but noted improving estimates for the rest of the market starting in the third quarter.

As the S&P 500 gears up for the second half of the year with a 15% gain since the start of 2024, investors are looking to see if the rally can be sustained. Bespoke Investment Group pointed out July’s historical outperformance in the equity gauge, sandwiched between weaker months like June, August, and September.

Corporate highlights included Jefferies Financial Group Inc.’s strong earnings, Interactive Brokers Group Inc.’s trading disruption hit, and Whirlpool Corp.’s surge on acquisition rumors. McDonald’s Corp. reiterated its stance on plant-based meat, while Moderna Inc. shares fell on vaccine efficacy concerns. General Mills Inc. gave a disappointing sales outlook, and Southwest Airlines Co. reduced its revenue estimate for the second quarter.

Key events to watch this week include China industrial profits, Eurozone economic confidence, US economic data, and Nike’s earnings release. Overall, the market remains cautious as it navigates through uncertainties in tech, interest rates, and market breadth.