Last week, the three major U.S. stock indices showed divergent performances, with the NASDAQ Index experiencing a significant decline. The weakness in large-cap tech stocks was the main drag on the NASDAQ's sharp drop last week. The highly representative NASDAQ 100 Index fell 2.56% last week, marking a cumulative two-week pullback of 6.54%.

From the released corporate earnings, especially the "prefer to over-invest (or front-load investments) rather than miss a major tech cycle" approach conveyed by Google during its earnings call, the short-term earnings outlook appears marginally downward.

Even if current earnings are not at fault, the marginal upward trend in investments and the marginal downward trend in earnings, combined with the high earnings expectations embedded in valuations, leave large-cap tech stocks with only one path in the near term: "valuation compression."

Amid the adjustment, the only counter-trend rebound against the downward pressure comes from macro expectations of interest rate cuts. These expectations are further divided into the magnitude and timing of the cuts. Currently, the market has largely priced in the expected magnitude of rate cuts this year, and the focus now is on the timing. The mainstream expectation remains that the first rate cut will come in September, especially after June's core PCE rose 0.18% month-on-month, slightly higher than the previous month's 0.13% but still below 0.2%, indicating a continued disinflationary path. This also somewhat supports the soft-landing scenario, helping to cushion the downward slope of tech stocks during the pullback.