Affected by factors such as trade war risks and the U.S. government shutdown, market sentiment deteriorated, and U.S. stocks encountered a “Black Friday.” The S&P 500 and the Nasdaq Composite Index fell by 2.71% and 3.56%, respectively, both marking their largest single-day declines since April. The VIX index, which measures market fear, broke above 22, ending a four-month period of stability. Analysis suggests that automated trading stop-losses and institutional exits amplified the volatility. This technical decline was accompanied by a surge in trading volume and panic selling, and the high-volatility environment may persist.
Technology stocks led the decline in this round of selling, with chips, semiconductors, and electric vehicle sectors falling across the board. Several leading stocks saw declines of 5%-8%. Investors are concerned that these industries, which heavily rely on global supply chains, are facing pressures from slowing growth. Art Hogan, a strategist at B. Riley Wealth, pointed out that technology stock valuations had previously been significantly inflated, and it is natural for capital to reduce exposure to high-valuation assets amid rising uncertainty.
Jamie Dimon, CEO of JPMorgan Chase, had previously warned that the risk of a severe decline in U.S. stocks within the next 6-24 months is underestimated. He believes the current rally is primarily driven by AI investments, with rising risks of market overheating. Combined with uncertainties such as geopolitical tensions, the market faces significant risks.
However, some investors remain relatively optimistic about the market outlook. James St. Aubin, Chief Investment Officer of Ocean Park Asset Management, believes that while escalating Sino-U.S. trade tensions could trigger a short-term pullback, it is unlikely to shake artificial intelligence’s role as the core theme driving the market higher. Saira Malik, Chief Investment Officer of Nuveen Asset Management LLC, also noted that U.S. stocks are poised to extend their gains before the end of the year, with robust corporate earnings—particularly from mega-cap tech companies—continuing to support stock prices. She analyzed that although current valuations are above historical levels, sparking concerns about a stock market bubble, the strong performance of corporate fundamentals remains sufficient to support existing valuation levels. As the Q3 earnings season approaches, corporate profits are expected to exceed expectations once again. Data shows that S&P 500 component companies are projected to see a 7.4% profit growth for the quarter, the smallest increase in two years. However, Malik emphasized that the core driver of the rise in technology stocks is not valuation expansion but actual earnings growth.
