Thursday was a historically strange day in the stock market. That may be good news

Wall
Street
saw
a
dramatic
shift
in
market
trends
on
Thursday,
with
winning
and
losing
stocks
swapping
places
for
a
day.
It
may
turn
out
to
be
just
what
the
rally
needs
to
keep
going.

The


Russell
2000
small-cap
index,
which
has
struggled
to
find
its
footing
all
year,
jumped
more
than
3%
on
Thursday.
At
the
same
time,
every
stock
in
the
so-called
Magnificent
Seven
fell,
including
a
more
than
5%
decline
for


Nvidia
and
a
2.3%
drop
for


Apple,
which
dragged
down
both
the


S&P
500
and


Nasdaq
Composite.

Bespoke
Investment
Group
shared
two
statistics
on
the

social
media
site
X
to
demonstrate
how
rare
it
is
to
have
that
type
of
split.

• Thursday
  was
  just
  the
  second
  day
  since
  1979
  when
  the
  Russell
  2000
  rose
  more
  than
  3%
  while
  the
  S&P
  500
  declined.
• The
  Nasdaq
  Composite
  underperformed
  the
  Russell
  2000
  by
  more
  than
  5
  percentage
  points
  in
  what
  appears
  to
  be
  biggest
  daily
  gap
  on
  record.
  The
  only
  other
  time
  the
  gap
  came
  in
  above
  5
  percentage
  points
  was
  in
  November
  2020,
  right
  after
  Pfizer
  shared
  positive
  results
  from
  a
  Covid-19
  vaccine
  trial.

While
the
major
market
averages
and
many
individual
401(k)
accounts
may
show
a
decline
for
the
day,
this
odd
set
of
results
could
be
a
positive
sign
for
the
market.
Much
of
the
recent
rally
has
been
driven
by
large
tech
companies,
leading
investment
pros
to
worry
about
a
narrow
group
of
stock
market
leaders.

“Today’s
an
important
day,”
Ed
Yardeni
of
Yardeni
Research
said
on
CNBC’s
“Closing
Bell.
“This
is
the
day
where
investors
are
starting
to
rotate
out
of
the
Magnificent
Seven
into
the
rest
of
the
market.
I
don’t
think
this
is
going
to
continue
to
pull
the
S&P
500
down
—
I
think
there’s
going
to
be
enough
money
to
keep
the
leading
stocks
that
have
done
so
well
fairly
elevated,
but
I
think
we
are
going
to
see
more
gains
in
the
S&P
493,
as
well
as
in
the
small-
and
mid-cap
stocks,”
he
added.

The
split
trading
came
after
the
June
report
for
the
consumer
price
index
early
Thursday
showed
headline
inflation

declined
last
month
and
is
now
up
about
3%
over
the
past
year.
That
bolstered
confidence
that
the
Federal
Reserve
will
begin
to
cut
interest
rates
as
soon
as
September.
Federal
Reserve
Chair
Jerome
Powell
indicated
in
Congressional
testimony
this
week
that
the
central
bank
was
aware
that
holding
rates
high
for
too
long
could
hurt
the
economy.

“Investors
are
rotating.
They’re
jumping
from
the
large-cap
tech
lily
pad
on
to
the
mid-
and
small-cap
pads,
along
with
real
estate,”
Sam
Stovall,
chief
investment
strategist
at
CFRA
Research,
told
CNBC.
“They
had
been
waiting
for
maybe
not
a
guarantee,
but
certainly
a
confirmation
that
the
Fed
is
likely
to
start
to
cut
interest
rates,
and
will
be
doing
so
not
in
reaction
to
a
recession.”

Activity
in
the
bond
market
supports
this
idea.
Yields
on

U.S.
Treasurys
were
down
across
the
board
on
Thursday,
meaning
government
bond
prices
were
rallying.

“You’ve
got
positive
CPI
on
the
back
of
a
slightly
dovish
Powell,”
Ross
Mayfield, investment
strategy
analyst
at
Baird,
told
CNBC.
“Rates
are
down
big,
and
you
have
kind
of
a
rotation
trade.
But
the
problem
with
the
market
being
so
concentrated
in
Big
Tech
is
that
rotation
trade
can
look
like
a
surface
level
negative.
And
I
think
we’re
seeing
some
of
that
today,”
he
said.

There
have
also
been
signs
in
recent
months
that
the
U.S.
economy
is
softening.
A
slow
growth
or
recessionary
environment
would
be
tough
for
small-cap
stocks,
which
tend
to
be
more
economically
sensitive
and
domestically
oriented
than
larger
companies.

—
CNBC’s
Sarah
Min
and
Alex
Harring
contributed
reporting.