Tech Stocks Drag Markets Lower as Meta Plunges 11%

The technology-heavy Nasdaq Composite bore the brunt of Thursday’s selling pressure, sinking 0.6% to close at 15,170 as investors fled growth stocks amid rising Treasury yields and disappointing corporate guidance. The broader S&P 500 followed suit, declining 0.3% to finish at 5,018, with technology stocks serving as the primary drag on market performance. The session’s most dramatic move came from Meta Platforms, which plummeted 11% after the social media giant issued weaker-than-expected advertising revenue guidance, sparking concerns about digital advertising demand and sending shockwaves through the technology sector.

Microsoft contributed to the tech sector’s weakness, falling 2.1% despite reporting strong cloud growth in its recent earnings report. The divergence between solid fundamental performance and stock price reaction highlighted investor sensitivity to valuation concerns in a higher interest rate environment. The technology sector’s struggles came despite generally positive economic data, underscoring how specific company guidance and sector rotation dynamics can override broader macroeconomic trends in driving daily market movements.

While technology stocks struggled, value-oriented names provided a bright spot as the Dow Jones Industrial Average rose 120 points to close at 39,310, demonstrating the market’s bifurcated nature. Chevron and Boeing led the blue-chip index higher, with both industrial and energy stocks benefiting from the rotation away from growth sectors. This divergence between the Dow’s performance and the declines in the S&P 500 and Nasdaq highlighted how investors are reassessing sector allocations in response to changing economic conditions and interest rate expectations.

The outperformance of value stocks relative to growth names represents a significant shift in market leadership, with investors favoring companies with strong current cash flows and dividends over those with high future growth potential. This rotation reflects growing concerns about how prolonged higher interest rates might affect the valuation of growth stocks, particularly in the technology sector where future earnings are discounted more heavily in current stock prices.

Treasury yields climbed to 4.68% following the release of stronger-than-expected GDP data, adding pressure to interest-rate-sensitive sectors like technology while providing support to financial stocks. The yield increase reflects growing expectations that the Federal Reserve may maintain higher interest rates for longer than previously anticipated, particularly if economic growth remains robust. This dynamic creates headwinds for growth stocks, whose valuations are more sensitive to discount rate changes, while potentially benefiting value-oriented companies with stronger current earnings.

Market volatility jumped 6% as investors showed renewed caution ahead of Friday’s Personal Consumption Expenditures (PCE) inflation report, which serves as the Federal Reserve’s preferred inflation gauge. The anticipation surrounding this key economic data point underscores how sensitive markets have become to inflation trends and monetary policy expectations. A hotter-than-expected reading could reinforce concerns about persistent inflation and potentially delay anticipated rate cuts, while a cooler number might alleviate some pressure on growth stocks.

The combination of rising Treasury yields, sector rotation, and pre-inflation report jitters created a cautious trading environment characterized by clear winners and losers. While the Dow’s resilience provided some optimism about the broader market’s health, the technology sector’s struggles and increased volatility signal that investors remain nervous about the outlook for interest rates and economic growth. Friday’s PCE report will likely determine whether Thursday’s sector rotation represents a temporary adjustment or the beginning of a more sustained market trend.