In a sharp reversal of fortune, the Nasdaq Composite and S&P 500 indices both closed lower on Thursday, ending their seven-session winning streak. The Nasdaq fell 2%, while the S&P 500 shed 0.9%. Conversely, the Dow Jones Industrial Average managed to eke out a 0.1% gain.

The decline was primarily driven by the tech sector, with big-name tech companies like Nvidia, Meta Platforms, Apple, and Intel experiencing losses. Tesla, previously on an impressive winning streak, tumbled 8.4% after news broke that the launch of its highly anticipated robotaxi event would be delayed to October from August.

Airlines also took a hit, with Delta reporting weaker-than-expected earnings and revising its guidance downwards. As a result, shares of United and American, along with other carriers, declined sharply.

The recent rally in the markets had been spurred by the strong performance of tech stocks and hopes of an interest rate cut by the Federal Reserve. However, on Thursday, tech stocks led the downward trend. On the other hand, sectors such as homebuilders and real estate companies saw gains as investors anticipated lower interest rates.

Investors' expectations of a rate cut have grown significantly, with the CME Group's FedWatch tool now indicating a 93% chance of a rate cut in September, up from 73% the previous day.

While tech stocks faltered, smaller companies had a strong showing, as evidenced by the surging Russell 2000 index, which rose by 3.7%.

The decline in consumer prices in June, as reported by the government, further fueled the expectation of a rate cut. This news gave rise to optimism in the housing industry, as the potential for lower mortgage rates could lead to increased demand from homebuyers. Shares of homebuilders such as D.R. Horton, Toll Brothers, PulteGroup, Lennar, and KB Home all experienced a surge in value.

In other market news, MicroStrategy announced a 10-for-1 stock split, intending to make its shares more accessible and stimulate demand. The company, one of the largest holders of bitcoin, has seen its share price double this year.

As for airlines, Delta faced a significant sell-off following its disappointing second-quarter earnings report. Although total revenue hit a record high, the airline's per-share profit fell well short of expectations. This led to a downturn in shares not only for Delta but also for rivals United, American, and Southwest.

Looking ahead, stock futures were slightly lower as investors awaited the release of the latest CPI inflation report.

With growing expectations of a rate cut, the markets experienced a mix of gains and losses across various sectors. Tech stocks faced a setback, while smaller companies and the housing industry reaped the benefits of rate-cut optimism. As the possibility of an interest rate reduction looms closer, investors are keeping a close eye on economic indicators and any future developments from the Federal Reserve.