Global stocks experienced a significant downturn, extending losses after enduring their steepest drop in almost a month, fuelled by concerns over high valuations. Bonds saw gains as investors sought the stability of safe-haven currencies like the yen. US equity-index futures also slipped in early Asian trading, suggesting further losses for both the S&P 500 and Nasdaq 100 indexes, with technology shares particularly affected.
Sentiment was further dampened by a tumble in Super Micro Computer shares in after-hours trading. Additionally, Advanced Micro Devices’ revenue forecast failed to impress investors. Asian shares fell sharply, recording their largest intraday loss since April with a 2.1 per cent drop. South Korea’s Kospi, a notable performer this year driven by the artificial intelligence boom, plummeted more than 5 per cent after AI-driven gains propelled the benchmark to a record high earlier in the week.
Amid the risk-off sentiment, Treasuries advanced across the curve, causing the yield on the 10-year note to fall three basis points to 4.05 per cent. The yen strengthened against the dollar, reaching 153.24. Cryptocurrencies also continued their decline, with Bitcoin trading below $100,000. This pause in the global stock rally follows a period where optimism surrounding artificial intelligence and expectations of Federal Reserve rate cuts had pushed the US stock benchmark up by nearly 40 per cent from its April lows.
However, these gains have been concentrated in a smaller number of shares, and sentiment, along with technical indicators, has shown signs of overheating. According to Matt Maley at Miller Tabak Asset Management, “The stock market is ripe for some sort of material pullback over the near-term, no matter where it’s going over the intermediate/longer-term.”
