NASDAQ Index evaporates 7 days of gains in a single day! Tech giants collectively falter, could this drop just be the beginning?
Yesterday's biggest news in the U.S. stock market was the NASDAQ index plummeting by 1.4%, marking the second-largest drop since April, erasing nearly 7 days of gains in just one day. The core reason is the collective slump of tech giants: Nvidia plummeted by 3.5%, dragging the market down. Although over 350 companies in the S&P 500 rose, the weight of the seven giants is too significant; it's like a basketball team where the core star players are underperforming, making it hard for the whole team to win no matter how hard they try.
The market shows characteristics of external stability and internal risk: the index closed at the day's lowest point, suggesting that the decline may not be over; U.S. Treasury bonds and the dollar strengthened, indicating that funds are seeking safety, and high-risk assets like Bitcoin also fell. This is reminiscent of the early stages of the 2008 crisis when risk positions were cut, reflecting not just simple emotional fluctuations but a more deliberate contraction of risk by funds.
Particularly concerning in this drop is the leading decline of the NASDAQ. Wall Street is starting to worry about a tech stock bubble, with Bloomberg even referencing valuations from the internet bubble period. Although corporate profits are still growing and AI investments are being realized, the speed of valuation expansion far exceeds profit realization, reminiscent of the 1990s bubble. In the options market, some are buying catastrophic put options for hedging, fearing another wave of decline.
Even more bizarre is the surface calm of the market, with undercurrents of turbulence: index volatility is extremely low, but individual stock volatility is outrageously high. Over the past month, the volatility of single stocks has exceeded the index by 19 points, one of the most extreme situations in 15 years, akin to an unusual calm before an earthquake.
Now, all eyes are on Federal Reserve Chairman Jerome Powell: the market has fully priced in a rate cut in September and another rate cut within the year. If he speaks even slightly less dovishly, it could trigger tremors. If his stance remains ambiguous, the market might drop first and then wait for new data to find direction.
