No relief appears to be in sight for the market, as twin fears of an AI bubble and status quo interest rates create panic among traders.
- The market sell-off deepened on Monday, with the broader S&P 500 Index and Nasdaq Composite indices closing below their respective 50-day SMAs
- Volatility continues, as the S&P 500 VIX futures rose nearly 7% overnight after the CBOE Volatility Index rallied almost 13% on Monday.
- Retail traders lament the market run, qualifying it as “too high, too fast.”
Tech and small-cap stocks could once again prove to be a sore spot, with the Nasdaq 100 and Russell 2000 futures moving sharply early Tuesday. The artificial intelligence (AI) bubble concerns engulfing the market have failed to lift, even as traders look forward to blockbuster results from AI bellwether Nvidia (NVDA) on Wednesday.
Rate worries continue to simmer as Federal Reserve officials maintain a mixed view regarding interest rates, and a regional manufacturing data released on Monday came in stronger than expected. Fed Governor Christopher Waller, typically seen as a dove, called for a December rate cut in his public appearance late Monday, basing his view on labor market weakness.
The S&P 500 VIX futures rose nearly 7% overnight after the CBOE Volatility Index rallied almost 13% on Monday.
How Futures Are Trading
As of 3:30 a.m. ET on Tuesday, the Nasdaq 100 and Russell 2000 futures slumped about 0.50%, while the S&P 500 and Dow futures slid 0.44% and 0.37%, respectively.
On Stocktwits, retail sentiment toward the SPDR S&P 500 ETF (SPY), an exchange-traded fund that tracks the S&P 500 Index, and the Invesco QQQ Trust (QQQ) ETF, which tracks the Nasdaq 100 Index, dampened to ‘neutral’ as of early Tuesday, from ‘bullish’ a day ago. The message volume on the SPY and QQQ ETF streams remained at ‘high’ levels.
Commenting on the QQQ stream, a bullish watcher attributed his positive stance to expectations that Saudi Arabia will announce a big AI deal with the U.S. The user flagged it as positive for Nvidia and AMD. The Middle East nation’s crown prince, Mohammed bin Salman, is scheduled to meet President Donald Trump on Tuesday, marking his first trip since the killing of journalist Jamal Khashoggi in 2018.
Ahead of the crown prince’s visit, Trump reportedly said the U.S. will sell F-35s to Saudi Arabia.
Another user, on the other hand, saw air being taken out of the “insane bubble.” “Imagine the run-up from April levels. Too high, too fast. Now it’s been a painful 2 weeks,” they said.
How Markets Fared Monday
The market sell-off deepened on Monday, with the broader S&P 500 Index and Nasdaq Composite indices closing below their respective 50-day simple moving averages (SMA). CFRA Research’s Sam Stovall said this lethal combo of both averages breaking below the SMAs occurred for the first time in many years, according to MarketWatch.
The sell-off was led by AI names, both big and small, with Nvidia falling 1.9%. Financial, consumer, industrial, material, and communication services stocks came under significant selling pressure, while the energy sector served as a bright spot.
The QQQ, SPY, SPDR Dow Jones Industrial Average ETF Trust (DIA) and the iShares Russell 2000 ETF (IWM) slumped 0.85%, 0.93%, 1.16% and 1.99%, respectively.
Key Catalysts To Watch Out For
The Commerce Department is due to release its delayed factory orders report for August at 10 a.m. ET. The National Association of Home Builders will release the results of its housing market survey for November at 10 a.m. ET.
Fed Governor Michael Barr is scheduled to make a public appearance at 10:30 a.m. ET.
Baidu (BIDU), Home Depot (HD), Medtronic (MDT), PDD Holdings (PDD), Weibo (WB), La-Z-Boy (LZB) and Dolby Labs (DLB) are among the notable companies due to announce their quarterly results on Tuesday.
How Other Markets Fared
Crude oil futures reversed course after their recovery on Monday, and gold futures slipped further toward the $4,000 mark. The 10-year Treasury note slipped further early Tuesday, and the U.S. dollar weakened against most major counterparts.
The sell-off in Bitcoin (BTC) steepened, as the apex crypto slipped below the $90,000 psychological mark before staging a slight recovery. It is still down over 5% over the past 24 hours.
The Asian markets experienced steep declines, dragged by the negative cues from Wall Street overnight. The key averages in Japan and South Korea fell by over 3% each, and the Taiwanese market declined by more than 2.50%.
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