Dow hits record high as Nasdaq falls on tech weakness and inflation data

• Apple fell 5% after announcing MacBook and iPad price increases due to rising component costs; Microsoft dropped nearly 4% on Xbox console price hikes, raising margin concerns across Big Tech.
• May core PCE inflation rose 3.4% annually, matching forecasts but marking the highest level since October 2023; traders still anticipate at least one Fed rate increase before year-end.
• Semiconductor stocks rallied sharply with the Philadelphia Semiconductor Index up 3.59% and on track for its strongest quarter on record, driven by Micron's 14% surge on strong earnings and raised guidance.

Market Summary: Dow Reaches Record as Tech Sells Off on Cost Pressures

Market Performance:

U.S. markets diverged on Thursday, with the Dow Jones Industrial Average rising 72 points (0.1%) to a new intraday record, while the Nasdaq Composite fell 0.46%. The S&P 500 remained near flat.

Sector Rotation:

Investors rotated out of major technology stocks into industrials, healthcare, and financials. Six of eleven S&P 500 sectors closed higher, with industrials leading gains of 1.9%. Notable winners included Johnson & Johnson (+1%), JPMorgan Chase (+2%), and Caterpillar (+5%).

Big Tech Under Pressure:

Technology stocks faced selling pressure due to rising component costs. Apple plunged 5% after announcing MacBook and iPad price increases driven by higher semiconductor costs. Microsoft fell nearly 4% following Xbox console price hikes. Alphabet and Meta Platforms each declined approximately 1%.

Semiconductor Strength:

Despite Big Tech weakness, chip stocks rallied sharply. Micron Technology surged 14% on strong fiscal Q3 results and raised guidance. Qualcomm advanced after increasing its non-handset revenue outlook. The Philadelphia Semiconductor Index jumped 3.59%, heading for its strongest quarter on record.

Inflation Data:

May's PCE index showed inflation at 4.1% year-over-year and 0.3% month-over-month, matching expectations. Core PCE rose 3.4% annually—the highest since October 2023—but in-line with forecasts. The 10-year Treasury yield edged down to 4.384%. Markets continue pricing at least one rate increase before year-end.

Geopolitical Developments:

WTI crude rose after Strait of Hormuz tensions, with reports of a vessel struck by an unidentified projectile, raising supply concerns.

M&A Activity:

Germany's Merck KGaA agreed to acquire Bio-Techne Corp for $73 per share in an all-cash transaction.