The Nasdaq 100, a tech-heavy index, experienced a significant decline on Thursday, plummeting by 1.6%. This drop was attributed to a cautious investor sentiment fueled by anticipation for Federal Reserve Chair Jerome Powell’s highly anticipated speech at the Jackson Hole Symposium, scheduled for Friday. Investors eagerly awaited insights on the future trajectory of interest rates and the overall economic landscape, leading to a risk-averse market mood.
The market sentiment took a sharp turn for the worse after 11 a.m. following the release of data indicating stronger-than-expected growth in private sector activity for August. This unexpected positive data threw cold water on hopes for a substantial rate cut by the Federal Reserve in September. Consequently, market-implied probabilities for a significant rate cut plummeted to 24%, down from 38% the previous day. This shift in expectations triggered a broader market pullback, with traders opting to lock in profits after the Nasdaq 100 had rallied 13% from its early August lows. Thursday’s decline marked the largest single-day drop for tech stocks since August 5.
Semiconductor stocks bore the brunt of the downturn, with the iShares Semiconductor ETF (SOXX) plunging 3.4%, its worst performance since August 2. Out of the 100 components of the Nasdaq 100, a whopping 80 ended the day in the red, signifying widespread weakness in sentiment. Moderna Inc. (MRNA), Intel Corp. (INTC), and MongoDB Inc. (MDB) were among the top losers, declining by 6.5%, 6.1%, and 5.8% respectively.
Four of the tech giants collectively known as the “Magnificent 7” significantly contributed to the Nasdaq 100’s performance decline: NVIDIA Corporation (NVDA), Microsoft Corporation (MSFT), Tesla, Inc. (TSLA), Amazon.com, Inc. (AMZN), and Broadcom Inc. (AVGO).
From a technical perspective, the Nasdaq 100 closed the session right at the crucial support level provided by its 50-day moving average. The market’s reaction on Friday will be pivotal in determining whether this support level holds, potentially triggering a rebound. If the index breaks below this crucial level, the next support zone lies around the 18,839 mark, which coincides with the 100-day moving average.
