US stock markets experienced a sharp decline on Thursday as investors grew increasingly apprehensive about inflated valuations in the technology sector and a prevailing risk-off sentiment permeated through financial markets. The downturn was amplified by new data indicating a troubling forecast for the job market.
The Dow Jones Industrial Average fell by 403 points, approximately 0.85%. The S&P 500 index dropped by 0.9%, while the tech-heavy Nasdaq Composite recorded a significant decrease of 1.44%. This slump was accompanied by widespread declines among technology and AI stocks, continuing a trend of volatility amid concerns of a potential market bubble.
Shares of chipmaker Advanced Micro Devices (AMD) fell by 6.3%, while Palantir Technologies (PLTR) experienced a decrease of 5.5%. Nvidia (NVDA) also saw a decline, falling 3%. Wall Street’s fear gauge, the VIX, rose by 11%, reflecting increased volatility and uncertainty. CNN’s Fear and Greed index indicated a state of “extreme fear” among investors.
Legendary investor Warren Buffett’s favored market metric, known as the Buffett Indicator, is currently showing a record high above 200%. This gauge, which compares the total market value of U.S. stocks to the country’s economic output, suggests that the market could be significantly overvalued. Chief economist Torsten Slok from Apollo Global Management pointed out that the S&P 500 is at historically extreme valuation levels.
In light of these developments, investors flocked to government bonds, lowering yields, following a report that showed a marked increase in layoff announcements—October saw the highest rise in job cuts for that month since 2003, based on data from Challenger, Gray & Christmas. U.S. Treasury bonds are typically viewed as a safe investment during economic slowdowns. A declining labor market often strengthens expectations that the Federal Reserve may cut interest rates, encouraging investors to acquire Treasuries.
Ulrike Hoffmann-Burchardi, global head of equities at UBS Global Wealth Management, noted that with bond yields remaining attractive and likely to decrease, high-quality fixed-income investments offer a promising mix of income and resilience during economic slowdowns and potential rate cuts.
Additionally, Wall Street remained attentive to the Supreme Court’s discussions on the legality of President Donald Trump’s extensive global tariff framework, which operates under an emergency powers law. While tariff concerns have receded in recent months, the revenue generated has helped alleviate some investor anxiety regarding the U.S. deficits. A ruling against the tariffs could reignite concerns among investors, despite previous worries earlier in the year.
After a lengthy period of positive performance, with the Dow hitting upward strides for six consecutive months from April through October—the longest winning streak since late 2017—this downturn has raised questions about the sustainability of stock market gains, particularly as they appear increasingly tied to the tech sector.
In parallel, Bitcoin, reflecting the general risk-off sentiment, dipped 2.4% to around $101,500, marking a nearly 20% decline since it reached an all-time high of over $126,000 just a month ago.
As investors navigate this uncertain landscape, the hopes for a more stabilized market remain reliant on the resolution of these pressing issues in the job market and tech valuations.