On July 17, local time, the Federal Reserve released its latest Beige Book report, which is a compilation of economic conditions across its twelve regional banksIt indicates a notable slowdown in growth expectations for the U.Seconomy amidst various uncertaintiesThe report highlights prevalent inflation pressures and a general trend of consumers opting for cheaper alternatives in their purchases.

Following the Beige Book's release, stock market reactions were significantThe tech-heavy Nasdaq index dropped by 2.77%, marking its largest single-day decline since December 2022. Meanwhile, the S&P 500 index fell by 1.39%. However, in a curious twist, the Dow Jones Industrial Average rose 0.59%, reaching new historical heightsThis divergence was largely influenced by substantial drops in technology stocks, particularly in the semiconductor sector, where major giants like NVIDIA, TSMC, and Meta Platforms saw declines surpassing 5%, leading to a combined market capitalization loss exceeding $600 billion.

The Tech Sector Faces Major Crashes

At the end of trading, the Nasdaq closed at 17,996.92, down 2.77%. The S&P 500 finished at 5,588.27, a decline of 1.39%. Contrarily, the Dow stood at 41,198.08, boosted by its upward trend that speaks to investors flocking towards traditional blue-chip stocks amid tech turmoil

Another notable dip came from ASML, which predicted lower-than-expected net sales for the third quarter, resulting in a staggering 12.74% loss in its stock valueThis particular situation heavily contributed to the tech sector's significant correction, wiping out $53.77 billion from its market cap.

The semiconductor index on the Philadelphia exchange experienced a catastrophic drop of 6.81%, the steepest since March 2020, which wiped nearly $500 billion off the overall sector market capOther chipmakers also fell sharply; Applied Materials fell by 10.48%, AMD by 10.21%, and Qualcomm by 8.61%. Even giants like Micron Technology and Marvell Technology took hits, with declines of 6.27% and 3.47%, respectively.

Moreover, major U.Stech stocks, a barometer of the industry’s health, were not sparedAs of market close, Meta saw a dip of 5.67%, Amazon and Apple fell 2.64% and 2.6%, with Google's parent company Alphabet down by 1.59%, and Microsoft slipping 1.33%. Netflix fell slightly behind with a 1.3% decline.

On the other side of the globe, the Nasdaq China Golden Dragon Index dropped 1.86%, indicating a widespread downturn in popular Chinese tech stocks

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The declines were fierce, with companies like WuXi Biologics plummeting by 14.15%, and Bitdeer Technologies by 7.69%. Semiconductor stocks such as SMIC and JinkoSolar also fell, along with key players in the electric vehicle sector like NIO and Xpeng, indicating a broad trend of losses.

Currently, many tech-savvy investors are rapidly reallocating their funds away from the tech heavyweights, instead favoring traditional value stocks, which has driven the Dow Jones to reach its record highs even amidst general market declines.

Slower Economic Growth Expectations

The Beige Book is typically released two weeks before the Federal Reserve's policy meetingsOn July 17, the report encapsulated the economic conditions up to July 8, illustrating moderate economic activity across most Federal Reserve districts throughout late May and June

Seven districts reported healthy economic activity, while five experienced stagnant or declining conditions, contrasting with the previous report that had only pointed to two regions without changes in activity.

The labor market retained a "slight growth" rating in both the May and July installments of the Beige BookDespite steady employment levels or moderate increases in many regions, most areas reported hiring stagnation or declines—especially in manufacturing, where decreased new orders translated into job cuts.

When it comes to wage trends, many districts indicate wage growth at a “moderate to moderate” pace, though some have started to notice improvements in worker availability and a slowdown in wage pressures due to less competitive hiring conditionsThis sentiment suggests a cooling in wage growth compared to previous reports.

In banking and finance, consumer and business loan demands showed signs of weakness

While overall loan demand has remained moderate, a tapering in deposits has raised concerns about liquidity in the banking sector.

The Beige Book also addressed the factor of expanding AI technology investmentsUtility contacts noted a rising electricity demand in commercial and industrial sectors, linked primarily to new and expanding data center projects focusing heavily on AI technologies.

Analysts interpret the Beige Book's findings as consistent with moderate overall economic activity in the U.S., although signs of slowdown are evidentConsumer spending has stabilized without growth, indicating that shoppers are more price-sensitiveWhile the economy is still registering growth, it's at a lethargic pace, as augmented indicators hint at potential stagnation or declineExperts warn that even "soft landings" often precede actual downturns.

Simultaneously, several Federal Reserve officials continueto signal a “dovish” stance