The S&P 500 (^GSPC) closed lower by more than 1% on Wednesday, largely due to a sell-off in tech stocks.

The Information Technology sector (XLK) declined nearly 4%, its worst one-day performance since December 2022.

The massive decline in Technology consumed what was an otherwise OK day inside the index and the broadening trade as a whole, with eight sectors outperforming the S&P 500 itself, including five closing in positive territory.

This serves as a reminder for index investors entering what some think could be a continuing rotation out of the technology-led rally of the past year into other cyclical areas of the market that haven't participated as much in the S&P 500's surge higher.

As this happens, even if other sectors catch a bid, the index itself may not keep setting new record highs given the technology sector makes up nearly one-third of the S&P 500.

"We could see a little bit of this churn where some stocks are passing the baton to other stocks," Ritholtz Wealth Management chief market strategist Callie Cox told Yahoo Finance on Monday. "Tech stocks are passing the baton to other stocks. Sure, we may not see prices move up as quickly as they have. But this is the kind of movement that strengthens the foundation of a bull. It means that this rally can be stronger and live longer eventually."

It's the early days of second quarter earnings, but at first blush S&P 500 (^GSPC) companies are once again surprising Wall Street to the upside.

Evercore ISI's Julian Emanuel noted Wednesday morning that 27 S&P 500 companies have reported second quarter results. Sales growth is up 5.4% for the quarter compared to last year while earnings are growing 16.7% year over year. Both metrics are coming in better than Wall Street expected.

This, Emanuel noted, puts the index on pace to grow earnings 9.6% year over year in the second quarter, slightly above the consensus projection for just under 9% growth.

Over the past week, markets have been pricing in the prospect of former President Donald Trump winning the 2024 presidential election.

This could mean various things for various parts of the market, but Yardeni Research chief market strategist Eric Wallerstein highlighted one bet he's seen taking place over the past week: looser regulation on mergers and acquisitions.

Wallerstein posted a chart showing a recent surge in shares of Evercore (EVR) and Lazard (LAZ), which are top players in the M&A industry. Both stocks pulled back slightly on Wednesday but are still up significantly over the past several sessions.

In an interview with Bloomberg, former President Donald Trump addressed his thoughts on the path for monetary policy, the Federal Reserve, and its chair, Jerome Powell.

Yahoo Finance's Jennifer Schonberger reports:

New comments from former President Donald Trump are turning up the political pressure on the Federal Reserve as policymakers make it clear they are getting closer to cutting interest rates.

In an interview with Bloomberg published Tuesday night, the Republican nominee again reiterated that central bank officials should not ease monetary policy before the November election.

"It’s something that they know they shouldn’t be doing," he said.

But Fed officials — including Fed Governor Chris Waller in a new speech Wednesday titled "Getting Closer" — are suggesting that the time for cuts is in fact drawing near.

"While I don’t believe we have reached our final destination, I do believe we are getting closer to the time when a cut in the policy rate is warranted," Waller said in his speech at the Kansas City Federal Reserve.

Powell’s response to the new wave of political pressure was to echo an independent, apolitical approach he has honed throughout 2024, emphasizing that the only criteria that matter to him are data on prices and jobs.

"This is my fourth presidential election at the Fed, and I can tell you we come to work the next day and do our jobs," Powell said.

He made the same point this past Monday during an interview at the Economic Club of Washington.

The S&P 500 is down more than 1% on Wednesday. But a closer look inside the index shows that in large part, it's Technology (XLK) pulling down the index. Technology is down more than 3.5% today, while Communication Services (XLC), also the home of several Big Tech names, is down nearly 1.4%.

Notably, seven of the 11 sectors are still in the green on the day.

Major geopolitical headwinds dragged on chip heavyweights Nvidia (NVDA), TSMC (TSM), and ASML (ASML) on Wednesday.

ASML slid more than 11% amid a Bloomberg report that the Biden administration is considering tighter semiconductor restrictions in an effort to prevent China from gaining access to high-end chip technology for AI.

Taiwan Semiconductor Manufacturing also fell more than 5% after Republican candidate Donald Trump told Bloomberg Businessweek that Taiwan "should pay" the US for protection against China.

During the interview published on Tuesday, Trump also said Taiwan took "about 100%" of the US chip business. Around 92% of the world’s most advanced chip manufacturing capacity is located in Taiwan, according to the US International Trade Commission.

Nvidia shares fell as much as 6% during the session as the primary manufacturer for the AI giant's chips is Taiwan Semiconductor Manufacturing.

Current US restrictions have already impacted US-based companies’ ability to sell to China. Nvidia sales to China decreased as a percentage of total data center revenue from 19% in fiscal year 2023 to 14% in fiscal year 2024.

It's worth noting Intel (INTC) and GlobalFoundries (GFS) rose on Wednesday as both companies are expected to benefit from US government initiatives to onshore semiconductor manufacturing.

The chip sell-off also came as investors have been rotating out of Big Tech names into small-cap stocks.

The Russell 2000 (^RUT) has outperformed large-cap stocks on the Nasdaq 100 (^NDX) for five straight sessions.

On Wednesday, the small-cap index was down less than 1% while the Nasdaq 100 declined more than 2%.

If people are worried about the election they didn't let it show on day one of Amazon (AMZN) Prime Day.

Adobe Analytics data that just hit show consumers spent $7.2 billion on the first day of Prime Day, up 11.7% year over year. It marks the single biggest e-commerce day so far this year.

Online sales were driven by electronics categories such as headphones and bluetooth speakers, TVs, fitness trackers, and tablets.

All in all, not bad

Investors are increasingly confident that the global economy is headed for a so-called soft landing, where inflation falls toward the Federal Reserve's target without high interest rates sending the economy into a tailspin.

In Bank of America's July Global Fund Manager Survey, released on Wednesday, 68% of respondents said a soft landing is the most likely outcome for the global economy in the next 12 months. This marked the highest percentage of respondents siding with such an outcome since January 2024. It tied for the second-highest reading in the past year.

The call for a soft landing is in line with how fund managers are currently evaluating the balance of risks to markets. For the first time in six months, inflation wasn't the No. 1 risk listed by respondents. (Geopolitical conflict took the top spot this time.)

Read more here.

New residential construction picked up in June as builders focused on scaling up multifamily projects.

Housing starts rose 3% to a seasonally adjusted annual pace of 1.35 million units, according to data from the Census Bureau released Wednesday. Multifamily construction contributed to the gain last month. New construction of five or more units climbed to a seasonally adjusted annual pace of 360,000, up from 295,000 the month prior.

“The rise in housing starts and building permits in June is not as good as it seems at first glance, as it was driven by gains in the volatile multifamily sector, which we think will prove temporary,” Thomas Ryan, an economist at Capital Economics, wrote after the release.

Single-family starts and permits, though, fell 2.2% and 2.3% month over month, respectively. It was the fifth consecutive monthly drop in single-family permits, signaling further weakness ahead.

The drop reflects the “argument that homebuilders are hesitant to start new projects given the large build-up of new homes for sale, which represents 9.3 months of supply at the current sales rate — the highest since November 2022,” Ryan added.

Homebuilder stocks lost steam Wednesday on the heels of the fresh government data. The SPDR S&P Homebuilders ETF (XHB) fell 0.66%. D.R. Horton, Inc. (DHI), the biggest US homebuilder, slipped 0.6%, while Lennar (LEN) and Toll Brothers (TOL) dropped 0.6% and 0.5%, respectively, during morning trading.

US stocks pulled back from record highs on Wednesday as techs came under dual pressure from worries about US export curbs on China and Donald Trump's stance on Taiwan.

The Dow Jones Industrial Average (^DJI) fell about 0.1% and the S&P 500 (^GSPC) fell nearly 1%, while the tech-heavy Nasdaq Composite (^IXIC) dropped more than 1.6%.

The Biden administration has told allies it's looking at imposing tougher restrictions on companies still making advanced chip technology available to China despite existing export curbs, Bloomberg reported.

This led to ASML (ASML) falling more than 8% and Nvidia (NVDA) sliding nearly 4%.

The BofA monthly fund manager survey is out, and it's the latest piece of Wall Street insight putting forward the potential for an election sweep in November.

Some of the key findings on this front:

• 77% think a sweep would lead to higher bond yields.

• 52% think a sweep would lead to a higher US dollar.

• 48% think a sweep would be positive for US stocks.