The morning trading of the three major U.S. stock indexes showed a mixed trend. As of press time, the Dow Jones Industrial Average fell by 0.5%, experiencing a second consecutive day of pullback after hitting a historic high. The Nasdaq index rose by 0.19%, and the S&P 500 index rose by 0.07%.

The differentiated trend under sector rotation has encouraged some Wall Street professionals. They were worried that the market's rise would rely too much on a few large technology stocks.

The fund flows from technology stocks to other technology stocks, which can explain why the Nasdaq performed poorly this week and why the information technology and communications services industry caused the S&P 500 index to decline.

Strategas' director of technical and macro research, Chris Verrone, said: "The news headline is 'these are all falling', and some momentum stocks are hit. But in the past two weeks, the market's potential breadth has been absolutely spectacular."

Verrone also said that the time for funds to flow into small-cap stocks will be "more lasting than the market generally expected".

Global IT interruptions may cause more market volatility this week.

The significant cybersecurity incident of CrowdStrike software caused service interruptions for airlines, banks, and finance globally.

However, the New York Stock Exchange and the Nasdaq, which use the company's software, both stated that the trading seems to have not been affected.

Microsoft also reported issues with its cloud computing services. Analysts said that the cybersecurity incident of CrowdStrike will make the market more volatile this week, which may exacerbate the retreat of technology stocks.

The prospect of the Fed's policies continues to be of concern.

As policymakers' confidence in price stability increases and labor market risks rise, the Fed is ready to cut interest rates in September.

Fed Chairman Powell may be more explicit about this at the policy meeting on July 30-31. But this is not a set thing.

Fed officials still hope to see the inflation rate continue to drop toward the target of 2%, and then promise to lower the benchmark interest rate from its 20-year high.

At the same time, Powell and his colleagues are also determined not to waste the opportunity to achieve a soft landing for the US economy, which has shown some signs of losing momentum.

The focus of Federal Reserve officials has shifted from inflation to the labor market. Powell told the US House of Representatives on July 10: "This is not just about lowering inflation. We need to pay attention to the situation in the labor market."

Two Fed officials hinted that it was necessary to reform discount window tools.

Boorman, a director of the Federal Reserve, and Logan, the president of the Dallas Federal Reserve, suggested that the Federal Reserve should assess to what extent its emergency lending tools can meet the liquidity needs of the banking system, implying the need to reform the discount window.

Speaking at the two-day bank financing conference jointly hosted by the Federal Reserve Bank of Dallas and the Federal Reserve Bank of Atlanta, Bowman said:"When it comes to the next steps for liquidity reform, I believe that we must address the known and determinate issues exposed during the banking crisis in the spring of 2023. This must include updating discount window operations and technology, and ensuring payment services are provided when needed." Logan hinted at the same meeting that the Fed will evaluate the discount window tool.

Investors will also closely watch the political field.

As the Republican National Convention draws to a close, Donald Trump is increasing his campaigning efforts, while pressure is mounting on Joe Biden to withdraw from the presidential race from his Democratic Party colleagues.

On Friday, there were reports that US President Biden's family began discussing his plans to withdraw from the presidential race, but the White House spokesperson denied the claim.

Jefferies strategist Mohit Kumar said: "From the big picture, the Fed's move towards rate cuts and the increased chances of Trump's election should be beneficial for risk, but this also means that investors need to reconsider their asset and sector allocation as we enter the summer. Heavily weighted sectors are vulnerable to adjustment."

Michael Metcalfe, global head of macro strategy at State Street Bank, said politics, rate expectations, and corporate earnings are having a strong impact on global markets.

"Potential changes in the likelihood of Trump's presidency and their impact on different markets, whether in the view of the US dollar or technology regulation, have clearly created some market rotation this week," he said.

Focus stocks

Most star technology stocks rose, with Broadcom and Meta up nearly 2%, and Google A up more than 1%.

Most popular China concept stocks fell, with Li Auto Inc down more than 2%, trip.com, NIO Inc, and Ke Holdings down more than 1%.

Some cybersecurity concept stocks rose, with SentinelOne up nearly 7%, Palo Alto Networks up more than 1%, and Cloudflare up nearly 1%.

Golden industrial concept stocks fell, Harmony Gold Mining fell more than 4%, U.S. Gold Corp fell nearly 2%, Gold Fields fell more than 1%.

Cybersecurity company CrowdStrike rose 7.29%, and officially joined the S&P 500 index on Monday. Some foreign analysts believe that CrowdStrike's valuation is out of sync with the industry average. At present, perhaps CrowdStrike's momentum will not be as strong as before.$CrowdStrike (CRWD.US)$Falcon Sensor software from Growth Tech is causing Microsoft's Windows operating system to crash, resulting in an 11% drop.

$Microsoft (MSFT.US)$State Street Bank narrowed its decline to nearly 1%, stating that it has successfully repaired the interruption issue with its programs and services.

$Eli Lilly and Co (LLY.US)$Microsoft is up nearly 3%, having previously risen nearly 4%, as its weight loss drug is approved in China.

$Intuitive Surgical (ISRG.US)$The latest company performance exceeded expectations, with a rise of more than 8%.

Edited by Jeffrey