Shares of technology companies slid as a long-term divergence in the stock market abruptly reversed itself in the wake of inflation data.

Investors had tended to buy mega-cap technology stocks even when economic data was running cold and as economically sensitive small-cap and mid-cap stocks languished, said Brent Schutte, chief investment officer at money manager Northwestern Mutual Wealth Management. "[Some] people think they're economically impervious, but I don't think anything is economically impervious," said Schutte.

Small and mid caps, in contrast, have "priced in a recession," lagging the mega-cap stocks by a large margin for the year to date. On Thursday, the tables turned: the small-cap Russell 2000 index shot higher by more than 3% while the Roundhill Magnificent Seven exchange-traded fund, which tracks the seven largest tech stocks -- including Nvidia, Microsoft and Apple -- fell by roughly 4%.

"It's a pretty rare dislocation, usually typical of bear markets," said Lorenzo Di Mattia, manager of hedge fund Sibilla Global Fund. Di Mattia had formerly bet against the Russell 2000, and recently retreated from that wager to take a more bearish position on the Nasdaq. Di Mattia based his wager on signs of the tech sector in general, and artificial-intelligence stocks in particular being overstretched on technical stock charts.

A U.K. government agency said Amazon.com risks a formal investigation if the e-commerce giant doesn't improve its treatment of grocery suppliers, the latest sign of government crackdowns on perceptions of digital antitrust issues.

Tesla shares tumbled after the electric-car maker reportedly delayed its closely watched Robotaxi debut by two months in order to build more prototypes.


Write to Rob Curran at rob.curran@dowjones.com

(END) Dow Jones Newswires

07-11-24 1758ET