A cooler-than-expected inflation report had traders fleeing technology stocks and piling into smallcaps.
The Russell 2000 surged 3.7%, while the Nasdaq Composite sank 2%. The S&P 500 fell 0.9% as it was weighed down by large technology stocks. The Dow Jones Industrial Average finally benefitted from its relative lack of tech by rising 32 points, or 0.1%.
The yield on the 2-year Treasury note fell to 4.503%. The 10-year yield fell to 4.192%.
The consumer price index fell 0.1% in June from May. Prices rose at 3% annual rate, which came in cooler than expected. Traders are now increasingly betting on a September interest rate cut.
Stocks that could benefit from lower rates in the real estate, utilities, and materials sectors rallied. Technology and communication services sank as all members of the so-called Magnificent Seven group of megacap stocks fell.
Because the Mag 7 includes the biggest stocks like Apple, Microsoft, and Nvidia, its declines can weigh down the S&P 500. The Invesco S&P 500 Equal Weight ETF, which gives every S&P 500 stock the same weight, rose 1.3%.
Big banks kick off earnings season tomorrow, but traders shouldn’t sleep on the producer price index, either.