U.S. stock futures saw a modest increase on Wednesday evening following a significant sell-off in the tech sector, which led to the worst session for the Nasdaq since 2022. Dow Jones Industrial Average futures rose by 48 points, or 0.12%, while S&P 500 futures and Nasdaq 100 futures climbed 0.15% and 0.27%, respectively.
During extended trading, shares of Domino’s Pizza surged more than 4% after the company’s second-quarter results exceeded expectations. Conversely, Beyond Meat saw a 15% decline after reports emerged that the meat substitute company is engaging in discussions with bondholders to restructure its balance sheet.
The rotation trade continued during regular trading hours, with the Nasdaq experiencing a 2.8% drop, marking its worst day since December 2022. The index closed below 18,000 for the first time since July 1. The S&P 500 also fell by 1.4%. However, the Dow Jones Industrial Average, which has less exposure to the tech trade, outperformed, gaining 243.6 points or 0.6% and closing above 41,000 for the first time ever.
Investors have been shifting away from high-flying tech stocks, driven by the growing likelihood of a rate cut in September, which has bolstered optimism in the broader market. The small-cap Russell 2000 index, which has seen a 9% surge in the last five trading days, reflects investors’ desire for a more diversified market amid concerns that the tech-driven rally may be losing steam.
Despite the change in market leadership, some experts caution that it may not be sufficient to shield stocks from potential challenges, including the possibility of an economic slowdown. Lauren Goodwin, chief market strategist at New York Life Investments, highlighted that the market has already been experiencing a soft landing for the past nine months. As the market adjusts to the reasons behind the expected rate cuts, the economy may still face a slowdown in the coming months.
On the economic front, jobless claims data for the week ending July 13 are expected to be released on Thursday morning. Economists anticipate claims to rise to 229,000, up from 222,000 the previous week. Additionally, companies such as Domino’s Pizza, Alaska Air, and Netflix are set to report their earnings on Thursday.