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Financial Markets                      07/18 15:55

   

   NEW YORK (AP) -- A widespread washout for U.S. stocks dragged Wall Street 
lower on Thursday.

   The S&P 500 dropped 0.8% to pull further from its all-time high set on 
Tuesday. The Dow Jones Industrial Average tumbled 533 points, or 1.3%, from its 
own record set a day before, while the Nasdaq composite sank 0.7%.

   As they did the day before, when the Nasdaq tumbled to its worst loss since 
2022, several Big Tech stocks led the market lower. Drops of 2% for Apple, 2.2% 
for Amazon and 0.7% for Microsoft were three of the heaviest weights on the S&P 
500.

   Unlike much of the last week, though, Thursday's losses hit many corners of 
the market. Smaller stocks, which had been cranking higher after badly lagging 
their larger rivals, fell more than the rest of the market. The Russell 2000 
index lost 1.8% after jumping more than 1% in five of the last six days.

   The majority of stocks within the S&P 500 also fell after giving up gains 
from earlier in the day. The sharpest loss came from Domino's Pizza, which 
dropped 13.6% despite topping analysts' expectations for profit in the spring.

   The pizza chain temporarily suspended its forecast for how many stores will 
open globally over the long term. While that's likely due to reasons beyond the 
company's control, analysts said it could frustrate investors.

   Darden Restaurants, the company behind Olive Garden, LongHorn Steakhouse and 
other chains, sank 3%. It said it would buy the Chuy's Tex-Mex chain in an 
all-cash deal valuing it at $605 million. Chuy's stock jumped 47.8%

   Stocks of chip companies stabilized a bit after tumbling a day earlier amid 
worries about potentially worsening tensions with China. U.S.-traded shares of 
Taiwan Semiconductor Manufacturing Co. rose 0.4% after the industry giant 
reported stronger profit for the latest quarter than analysts expected. It 
bounced back from its loss of 8% the prior day, but only after swerving between 
gains and losses.

   Nvidia rose 2.9% after likewise flipping between gains and losses through 
the day. It stretched its gain for the year to nearly 145%.

   Earlier this year, a climb for Nvidia and some of the other handful of 
stocks that came to be known as the "Magnificent Seven" may have been enough to 
prop up the rest of the market.

   That's what they did for a while, after all, as their stock prices rocketed 
amid a frenzy around artificial-intelligence technology, even as other stocks 
struggled under the weight of higher interest rates and slowing economic growth.

   Because the S&P 500 and other indexes give more weight to stocks of bigger 
size, and because the Magnificent Seven stocks had swelled into Goliaths, gains 
for Big Tech could drive up the market almost by themselves.

   But a shift had gotten underway on Wall Street over the last week. Instead 
of piling into Big Tech, which critics have called too pricey, investors moved 
toward smaller stocks, companies whose profits are closely tied to the 
economy's strength and other areas that have been unloved for a while.

   The momentum kicked into a high gear after an encouraging report on 
inflation raised expectations for the Federal Reserve to begin easing interest 
rates in September. Lower rates and a solid U.S. economy could mean bigger 
benefits for smaller companies than for Big Tech giants, which rose almost 
regardless of such factors.

   The market saw a similar turn in momentum around the end of last year, but 
it didn't last. Strategists at UBS led by Maxwell Grinacoff say they need to 
see several milestones "for this rotation to be real and sustainable."

   Among them, they say the job market and economic growth would need to 
sustain modestly over the next few months and inflation would have to continue 
to cool. In the meantime, more than a third of the smallest stocks remain 
unprofitable.

   In the bond market, Treasury yields rose following some mixed data on the 
economy.

   One report said more workers applied for unemployment benefits last week 
than economists expected. That could be a signal of a softening job market, 
though the number remains low compared with history.

   A separate report said manufacturing in the mid-Atlantic region is growing 
much better than economists thought.

   The yield on the 10-year Treasury rose to 4.19% from 4.16% late Wednesday.

   Wall Street is hoping the economy can remain in a "Goldilocks" state, where 
it's not so hot that it puts upward pressure on inflation but not so cold that 
it slides into a recession.

   Besides hopes for coming cuts to the Fed's main interest rate, which has 
been sitting at its highest level in more than two decades, expectations for 
stronger corporate profit growth have also helped drive stocks.

   D.R. Horton jumped 10.1% for the largest gain in the S&P 500 after the 
homebuilder reported stronger profit and revenue for the spring than analysts 
expected. Other homebuilders also rallied, including a 2.5% rise for PulteGroup 
and a 2.1% climb for Lennar.

   All told, the S&P 500 fell 43.68 points to 5,544.59. The Dow dropped 533.06 
to 40,665.02, and the Nasdaq sank 125.70 to 17,871.22.

   In stock markets abroad, European indexes were mixed after the European 
Central Bank held its main interest rate steady. Asian indexes were also mixed.

   ___

   AP Business Writers Yuri Kageyama and Matt Ott contributed.

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