U.S. stock indexes fell on Thursday as a rally in growth stocks ran out of steam, while economically sensitive cyclicals gained as a fall in weekly jobless claims last week strengthened views about a recovery in the labor market.
Mega-cap technology stocks including Apple, Microsoft Corp , Amazon.com, Alphabet and Facebook fell between 0.7% and 1.7%.
A recent rotation into the growth sector pushed the S&P 500 and the Nasdaq to record peaks earlier in the week.
The S&P 500 technology sector index fell 0.9% and was on track to snap a four-day winning streak. Seven of the 11 major S&P sectors were trading lower, including consumer discretionary and communication services.
"This shift to growth of late is interesting but I don't think it's going to last long, there's a great setup for value to rule the day," said Josh Wein, portfolio manager at Hennessy Funds.
"There's this flight to perceived quality, and into actual liquidity."
Value-oriented sectors such as financials, industrials and materials led gains on Thursday, as the Labor Department said initial claims for state unemployment benefits fell 26,000 to a seasonally adjusted 360,000 for the week ended July 10, a 16-month low. read more
However, investors have been fretting over a sooner-than-expected hawkish shift by the Federal Reserve amid signs of a steady economic rebound.
"There is some concern that the economy has sort of reached the maximum level of growth," said Robert Pavlik, senior portfolio manager at Dakota Wealth in Fairfield, Connecticut.
Fed Chair Jerome Powell said on Wednesday he was confident recent price hikes were associated with the country's post-pandemic reopening and would fade.
The second-quarter earnings season began on a strong note this week, with the four largest U.S. lenders - Wells Fargo & Co, Bank of America Corp, Citigroup and JPMorgan Chase & Co - posting a combined $33 billion in profits.
The S&P 500 banks index reversed early declines to rise 1.2%, with Morgan Stanley adding 1.4% as it reported a better-than-expected quarterly profit.
At 12:01 p.m. ET, the Dow Jones Industrial Average (.DJI) was up 7.35 points, or 0.02%, at 34,940.58 and the S&P 500 (.SPX) was down 14.09 points, or 0.32%, at 4,360.21.
The Nasdaq Composite dropped 102.25 points, or 0.70%, at 14,542.70.
Declining issues outnumbered advancers for a 1.27-to-1 ratio on the NYSE and for a 1.46-to-1 ratio on the Nasdaq.
The S&P index recorded 27 new 52-week highs and no new low, while the Nasdaq recorded 19 new highs and 147 new lows.