US stock markets faced a decline, with the NASDAQ index dropping the most. It fell by -0.25% to 21,742 after closing at a record high the day before. The S&P index decreased by -0.15%, ending at 6,485.47, while the Dow industrial average remained stable. The Russell 2000 saw a drop of -23.27 points, or -0.97%. Notable declines included Lennar, which fell by -3.33% due to worries about earnings misses. Dell Technologies dropped by -2.77% after its CFO resigned, raising concerns about profitability. Worthington Industries and Dollar Tree fell by -2.74% and -2.49%, respectively, impacted by tariffs. United Airlines and Shopify Inc. each decreased by -2.20% and -1.93%. Other significant drops included ARK Genomic Revolution (-1.76%), RTX Corp (-1.69%), and Robinhood Markets (-1.69%).

Market Downtrend Among Major Companies

Ford Motor, Northrop Grumman, and Rivian Automotive experienced declines of -1.32%, -1.32%, and -1.25%, respectively. Uber Technologies, Snowflake, and Caterpillar also faced downturns of -1.18%, -1.18%, and -1.19%. This illustrates a general downward trend among many major companies. With the Nasdaq retreating from its record close, profit-taking and increased market volatility seem to be emerging. This slight decline suggests it may be a good time to consider protective strategies. The CBOE Volatility Index (VIX), currently around a low of 14, could rise, making long volatility positions appealing. The tech sector, a strong performer this year, is showing weakness across various companies, from semiconductors like Broadcom to software firms like CrowdStrike. Since the Nasdaq 100 has risen over 25% since the beginning of 2025, buying put spreads on the QQQ ETF may be a smart move. This approach could benefit from a moderate decline or consolidation in the coming weeks.

Concerns in the Housing Market

Weakness in companies like Lennar and Home Depot highlights ongoing worries about the housing market and high interest rates. The average 30-year fixed mortgage rate rose to 7.1% last week, the highest since May 2025, putting pressure on homebuilders. There’s a chance to buy puts on housing-related indices ahead of upcoming housing starts data. Struggles faced by airlines and consumer-focused companies like Dollar Tree and Tapestry suggest concerns about consumer spending. The last retail sales report for August 2025 showed only a 0.1% increase, which fell short of expectations and indicates households are cutting back. This reinforces a cautious outlook for the consumer discretionary sector for the rest of the third quarter. The Russell 2000’s nearly 1% drop signals that investors are becoming more risk-averse, as small-cap stocks are particularly sensitive to economic growth. Similar underperformance in small-caps during the third quarter of 2023 preceded a broader market correction. This trend reinforces the case for either shorting Russell 2000 futures or buying protective puts on the IWM index. Create your live VT Markets account and start trading now.

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