The Nasdaq Composite slipped again on Wednesday as Wall Street continued to shed some of the year’s top performers like those tied to artificial innotifyigence.
The Nasdaq Composite was down 0.7%. The Dow rose about 16 points, or less than 0.1%. The S&P 500 was down 0.2%. The Dow shiftd a few tiny steps closer to its Dec. 4 closing high of 45,014.04.
The yield on the 2-year Treasury note was down to 3.74%. The 10-year yield was down to just under 4.3%.
Just like on Tuesday, exalter-traded funds focutilized on risk, growth, and momentum struggled, while low volatility and dividfinish stocks rallied. That declared, the selling lost some steam in the early afternoon, and the Nasdaq finished the session well above its lows.
Mizuho’s Daniel O’Regan chalks up the Nasdaq’s slide to profit-taking in AI stocks, as well as drops in related sectors like non-profitable tech and meme stocks. He notes trading volumes were light for most sectors outside of technology.
“Tech themes are lagging again, however, this feels more like a continuation of the rotation/unwind that started last week, not some new fundamental breakdown,” notes O’Regan. “It’s August, volumes are light, and when everyone owns the same AI winners, even tiny selling can create outsized shifts.”
Citi strategist Scott Chronert writes he and his team are fielding questions about what’s behind the slide. He notes there’s always a risk of 5% draw down, as it’s “a normal course of market progressions and can happen without a discernible catalyst.”
Now, a 10% draw down would necessary a trigger, the likes of which Chronert hasn’t observed in the past few days. He believes earnings in the third and fourth quarter are the largegest concern, if AI stocks disappoint or tariffs hit harder than they did in the second quarter.
“Our call headed into [the second half] has been constructive but with an expectation for ongoing risk of bouts of volatility,” Chronert writes. “Thus, we want to be prepared to purchase into a more material draw down, should it unfold.”
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