The Nasdaq 100 is set for its biggest opening drop in more than four years, with investors bracing for days of volatility amid rising concerns over a slowing US economy and overheated gains in the tech sector.
Contracts on the Nasdaq 100 fell as much as 6.5% before paring losses to about 4.5%. That puts the tech-heavy index on track for its worst open since the pandemic days of March 2020. S&P 500 futures were down 2.7% while those tracking the Dow Jones Industrial Average declined 1.6%.
Megacap technology stocks bore the brunt of the selloff, with chipmaker Nvidia Corp. falling more than 9% and Apple Inc. down almost 8%. Microsoft Corp., Meta Platforms Inc. and Tesla Inc. declined at least 4% each.
Concerns over health of the US economy took center stage after Friday’s data pointed to rising unemployment levels in July, triggering a closely watched recession indicator and stoking fears that the Federal Reserve hasn’t moved quickly enough to cut interest rates. Investors bid up haven assets such as the yen, while Cboe VIX August futures spiked.
“With the summer low liquidity, the still heavy trend plays that need unwinding and the VIX sky-high, this selloff move could go on for a few days,” said Florian Ielpo, head of macro research at Lombard Odier Asset Management. Still, “the macro picture itself is not as bad as the market seems to think.”
The Nasdaq 100 dropped into a correction Friday as investors fret over elevated valuations and the high cash outlay for investments in artificial intelligence. The Philadelphia Semiconductor Index has already pulled back 22% from a peak, even before Monday’s open.
News that Warren Buffett’s Berkshire Hathaway slashed its stake in Apple by almost 50% in the second quarter further drove risk-off sentiment on the tech sector. Slow monetization of AI tools — a long standing concern among tech investors — persists as the first preview of Apple Intelligence failed to live up to the hype.
The AI supply chain was dealt with another blow amid reports that Nvidia’s highly-anticipated Blackwell chips will be delayed due to design flaws. The chips may be postponed by three months or more, which could potentially hit big tech firms from Meta to Microsoft, the Information reported.
Tech Jitters
“In these sorts of scenarios, investors need to be careful,” said Ben Barringer, an analyst at Quilter Cheviot. “When sentiment begins to sour, the falls become more extreme than perhaps they should be. The next few weeks is likely to be a volatile one for tech stocks as this new environment plays out.”
Turbulence in Japan — where the central bank has started to raise interest rates as the Fed looks to cut — is also having ripple effects across global markets of various asset classes. This is due to moves to reverse carry trades, in which investors had borrowed at lower rates in Japan to fund purchases of higher-yielding assets elsewhere.
“With yen carry trades now being unwound quickly, not only has the Japanese currency notably broken its depreciation trend against all major units, but risk assets that those trades were financed with are also being sold off,” wrote Asymmetric Advisors strategist Amir Anvarzadeh, in a note to clients.
A message from Advisor Perspectives and VettaFi: To learn more about this and other topics, check out our most recent market outlooks.
Bloomberg News provided this article. For more articles like this please visit
bloomberg.com.
Read more articles by Henry Ren, Kurt Schussler
