Wall Street took a sharp punch to the gut on Monday as major indices tumbled in midday trading, with the Dow Jones down roughly 400 points and the tech-heavy Nasdaq plunging nearly 2 percent.
The broad-based selloff signals mounting investor anxiety ahead of critical economic data and Nvidia’s earnings report due Wednesday.
Uncertainty about Federal Reserve rate cuts, weak growth signals from China, and concerns about stretched tech valuations have created a toxic mix for stock prices.
Defensive sectors are winning, while growth stocks, the very engine of this year’s gains, are facing the sharpest pressure yet.
The perfect storm of bad news
Several headwinds converged to spark Monday’s decline. Perhaps most damaging is the dramatic shift in rate-cut expectations.
Just weeks ago, traders were pricing in roughly 95 percent odds of a December rate cut from the Federal Reserve.
Today, that probability has plummeted to below 50 percent, a shocking reversal that fundamentally changes the calculus for how much cash flows from future corporate earnings are actually worth.
Federal Reserve officials have been increasingly hawkish in their public remarks.
Minneapolis Fed President Neel Kashkari recently warned about “strong economic resilience” and “sticky inflation pressures,” effectively slapping down hopes for easy money ahead.
Fed Chair Jerome Powell has already signaled that a December cut is “not a foregone conclusion,” deflating sentiment that had been buoying markets for months.
The timing is particularly brutal because economic data is finally flowing again after the six-week government shutdown.
That data void actually gave investors the freedom to believe whatever they wanted about inflation and employment. Now, facing real numbers, uncertainty is creeping back in.
This week alone will bring jobless claims, industrial production, and housing starts, all data points that could either comfort or rattle the market further.
Global weakness is adding to the gloom. China’s October retail sales rose just 2.9 percent year-over-year, the slowest pace in over a year.
Industrial production climbed only 4.9 percent, while fixed-asset investment actually declined 1.7 percent.
These aren’t just numbers; they signal that the world’s second-largest economy is cooling faster than expected.
US-listed Chinese tech stocks reflected the weakness, with JD.com down 3.4 percent and XPeng dropping 5.8 percent.
Tech stocks bear the brunt
Within the broader market decline, technology and AI-related shares have been absolutely hammered.
Nvidia, the linchpin of the AI narrative, was down nearly 2.5 percent in Monday’s trading, having already lost significant ground the previous week ahead of its crucial earnings report.
Meta Platforms fell 1.4 percent. Oracle dropped 2.8 percent. Palantir Technologies, a darling of the AI crowd, plunged 3.1 percent.
The severity of the tech selloff reflects a sobering reality: the market has frontloaded massive gains into these names based on AI optimism and profit expectations that may not materialize.
When valuations get stretched and sentiment shifts, selling can accelerate quickly. The Nasdaq has lost roughly $1.74 trillion in market value over just two weeks.
That’s the kind of destruction that reverberates through investor portfolios and shakes confidence.
What makes matters worse is that the biggest decision point, Nvidia’s earnings, is just around the corner.
Investors are nervous that the semiconductor giant may not deliver the kind of blowout results or bullish guidance needed to justify current stock prices.
If Nvidia disappoints, or if its guidance suggests the AI spending spree is cooling, watch for the tech selloff to accelerate sharply.
Defensive plays like utilities, healthcare, and staples have been the safer harbor.
UnitedHealth dropped 3.2 percent, but that’s still far less damage than what growth names took. Investors fleeing volatility are rotating into lower-beta, more stable businesses, a classic tell that risk appetite is evaporating.
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