Stocks drop from record highs amid tech sell-off

The S&P 500 declined 0.9% to drop back below 5,600 after crossing the level for the first time on Wednesday, while the tech-heavy Nasdaq Composite dipped nearly 2%

US stocks rolled over on Thursday as investors rotated out of tech after a crucial inflation report showed consumer prices unexpectedly dropped on a month-over-month basis for the first time since 2020.

The S&P 500 declined 0.9% to drop back below 5,600 after crossing the level for the first time on Wednesday. The Dow Jones Industrial Average (DJIA) gained almost 0.1%. The tech-heavy Nasdaq Composite led the way down, dipping nearly 2%.

Big Tech sold off hard with heavyweights such as Nvidia (NVDA) down more than 5%, while the entire "Magnificent 7" group of stocks had its worst day in almost a year. Tesla (TSLA) shares snapped an 11-day winning streak to decline more than 8% in its worst day since January after a Bloomberg report that the Electric Vehicle maker will delay the unveiling of its robotaxi.

Investors flocked to rate sensitive sectors such as Real Estate (XLRE) and Utilities (XLU) following June's cooler than expected inflation number.

The Consumer Price Index (CPI) last month dropped 0.1% over the previous month and rose just 3.0% over the previous year. The annual gain was the slowest increase in consumer prices since early 2021.

Stock gains had picked up pace this week as Federal Reserve Chair Jerome Powell suggested that conditions are almost right for the Fed to start making interest-rate cuts. Thursday's inflation figures bolstered bets on a cut by September, with nearly 90% of traders expecting such an outcome, shows the CME FedWatch tool.

Another earnings season starts on Friday when JPMorgan Chase (JPM), Wells Fargo (WFC), and Citigroup (C) all report their second quarter results.