There are still many positives at play, including economic growth, strong corporate profits, historically low unemployment, and declining inflation.

Despite the softer labor readings, jobs are still on the rise per the JOLTS (Job Openings and Labor Turnover) report, the unemployment rate is historically low, GDP continues to beat expectations, and corporate earnings and sales are trending higher. This doesn’t necessarily foreshadow a recession to me.

The rotation out of tech and into other areas of the market was apparent all week and is evidenced by the fact the “tech heavy” NASDAQ and S&P 500 were the biggest losers while small and mid-caps stole the show. The Dow Jones Industrial Average, which is not as heavily influenced by the technology sector, showed impressive gains for the week after revisiting the previous technical resistance level around the 40,000 mark. Revisiting a key level after a breakout is a textbook move and one might expect momentum to build now that this level has offered new support.

Major large-cap stock indices hit new highs, but the momentum shifted on Wednesday when mixed results from a couple of semiconductor companies seemingly caused a decline in some of the larger tech stocks, which significantly influence the S&P 500 and NASDAQ indices. As a result, the capitalization-weighted S&P 500 closed down nearly 2%. However, the equal-weighted S&P 500 only fell by 0.2%, and many value-oriented and cyclical stocks posted gains for the week, driving the Dow Jones Industrial Average up nearly three quarters of a percent.

While Jobless Claims came in smaller than anticipated, stocks shrugged off Friday’s slightly hot Producer Price Index (PPI) report as investor expectations for a September rate cut and potentially one more in 2024 grew. A notable rotation away from mega-cap tech stocks towards the “rest of the market” took place with cyclical stocks and interest rate sensitive issues outperforming.