Tech Rally Grinds to a Halt as Investors Rotate Into Small-Cap Stocks [Video]

The S&P 500’s recent rally to record highs ground to a halt Thursday as tech stocks weighed on the index.

Artificial intelligence (AI) darling Nvidia (NVDA), Microsoft (MSFT), Apple (AAPL), and other large-cap tech stocks tumbled, as investors rotated into small caps amid hopes they could get a boost from Federal Reserve rate cuts.

Small cap stocks surged, with the Russell 2000 up more than 3% after the Labor Department’s latest inflation report showed consumer prices unexpectedly fell in June, raising hopes the Federal Reserve will have the confidence to cut interest rates this year. 

Rates cuts by the Fed would lower the costs of taking on debt for borrowers, and small-cap stocks could potentially stand to get a bigger boost from Fed rate cuts as many small and mid-caps companies have more floating debt than their larger counterparts.

With inflation cooling, markets are currently pricing in an over 90% chance of a rate cut in …