The Nasdaq today led the market lower, as technology stocks took heavy hits after Fed officials dampened hopes for aggressive interest-rate cuts.
XThe Nasdaq plunged 1.4% and made a sharp drop below 8000, a milestone for the index. The composite now needs to find a floor at the 50-day moving average to avoid further deterioration. Stocks Tuesday were broadly lower.
Invesco QQQ Trust (QQQ) fell even more, closing with a 1.7% loss. The Nasdaq 100-tracking ETF saw top Nasdaq component Microsoft (MSFT) fall more than 3%. A Jefferies analyst gave pessimistic comments on Microsoft's cloud business, reports said.
Software leaders were down sharply. Shopify (SHOP) plunged more than 9% after Wedbush downgraded the stock to neutral from outperform. Shopify is nearing a test of support at the 10-week moving average. Paylocity (PCTY), another software stock down sharply, slid below the 50-day line. Paylocity was removed from IBD Leaderboard today.
Other major Nasdaq components such as Netflix (NFLX), Facebook (FB) and Alphabet (GOOGL) were down 2% to 3%.
The S&P 500 fell 1% and the Dow Jones Industrial Average shed 0.7%. Indexes closed near session lows. Easily, it was the indexes' largest declines since the June 7 market follow-through.
Volume rose from Monday's levels, according to unconfirmed data. Losing stocks led winners by an 11-5 ratio on the NYSE and by nearly 12-to-7 on the Nasdaq.
Fed Comments Spook Market
Selling picked up after Fed Chairman Jerome Powell said the Federal Reserve is watching economic data and financial markets as it weighs its next move on monetary policy. But in a rebuke to President Donald Trump's criticism of the Fed, Powell said the central bank won't act based on "short-term political interests."
Also, St. Louis Fed President James Bullard said a quarter-point rate cut seems appropriate but a half-point cut would be too much. Some investors have been expecting a half-point cut when the Fed meets again in July.
The yield on the 10-year Treasury note fell below 2% for the first time since November 2016. It was quoted at 1.99%, down nearly 3 basis points, late Tuesday.
Software, internet and apparel industry groups were some of the worst hit. Defensive groups such as tobacco, hospitals, drugstores and food wholesalers were among Tuesday's top industry groups.
Juan Carlos Arancibia is the markets editor of IBD and oversees our market coverage. Follow him at @IBD_jarancibia
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