Global stock markets saw selling continue for a fourth day as investors sold off riskier assets ahead of Nvidia’s earnings report and a key US jobs report later this week amid concerns over high valuations in technology stocks.
The MSCI All Country World Index hovered near a one-month low. Asian stocks fell 1.2%, with technology stocks leading the decline, on track for a third consecutive day of losses. The number of decliners was more than twice that of gainers. Previously, the S&P 500 dropped 0.9% and the Nasdaq 100 fell 0.8%. Bitcoin prices dropped to around $91,500, hitting a new low since April, further confirming the weak market sentiment.
In other market sectors, the US dollar index maintained the gains from the previous trading day, while the price of gold fell for the fourth consecutive trading day. The main reason for this was the weakening of market expectations for the Federal Reserve to cut interest rates next month. Generally speaking, lower interest rates make non-yielding gold more attractive to investors.
These moves highlight the ongoing uncertainties surrounding interest rates and the earnings of technology companies. Nvidia’s earnings report on Wednesday will test investors’ confidence in the high valuations of the artificial intelligence sector. Subsequently, market attention will shift to the delayed release of the September jobs report on Thursday, which will offer investors clues about the Federal Reserve’s policy outlook.
“Typically, the monthly jobs report would be the focus of this week’s economic calendar, but due to the poor performance of AI trading in the past few weeks, Nvidia’s earnings report has once again become a key factor in market momentum,” said Chris Larkin of E*Trade, a unit of Morgan Stanley.
Analysts who study chart patterns in the US stock market have sounded the alarm, fearing that the recent decline could evolve into a full-scale correction of at least 10%.
The S&P 500 index suffered a sharp sell-off on Monday, with its decline expanding to 3.2%. The benchmark index had hit a record high on October 28. It closed below its 50-day moving average for the first time in 139 trading days, ending a streak that was the second-longest since the start of the century of being above this closely watched trend line.
John Roque, the technical analysis director of 22V Research, said that the Nasdaq Composite Index has also sent out some “ominous” signals. He pointed out that among the approximately 3,300 component stocks of the index, the number of stocks at their 52-week lows is greater than that at their 52-week highs, indicating internal market weakness and a low possibility of further rebound.
Nvidia’s share price also fell in US trading after a filing showed that Peter Thiel’s hedge fund sold its stake in the chipmaker in the third quarter.
Dennis Follmer of Montis Financial said, “Although we should have expected that blindly pouring trillions of dollars into artificial intelligence capital expenditure without a clear path to profitability would eventually be liquidated, as long as the Federal Reserve remains in an accommodative mode and the economy remains strong, a market crash is unlikely to occur.”
With central bank officials divided, the path of interest rate cuts is another major concern for investors.
Fed Vice Chair Philip Jefferson said he believes risks to the labor market are skewed to the downside, but he cautioned policymakers to proceed with caution. Fed Governor Christopher Waller supported a rate cut in December, citing weak job conditions. Traders expect a rate cut next month with a probability of about 40%.
