The markets around the world slid lower Monday after a dramatic decline in tech stocks brought down key indexes in advance of the much-anticipated Jackson Hole Economic Symposium later this week.
U.S. equities fell sharply on Monday, with the Nasdaq Composite slipping 1.8 percent which was the worst single-day performance since the previous week. Its benchmark, the S&P 500 fell 1.2 percentage as did it was the Dow Jones Industrial Average fell 0.9 percent. Tech names with mega-caps have led the slide: Nvidia declined 4.5 percentage, Microsoft 3.1 percent as well as Apple 2.7 3.1% which erased billions of market capitalization.
Investors’ Eye Powell in Jackson Hole
The market selloff is a sign of growing fear in the lead up to Federal Reserve Chair Jerome Powell’s speech during the Jackson Hole Economic Symposium. Markets are awaiting indications that the Fed might keep rates at a high for a longer period to reduce inflation. This could scuttle hopes for future cuts. The markets for futures are pricing an 70 percent chance of another rate increase in December as opposed to 50% the week before.
Global Markets Mirror U.S. The weakness
European shares were a step ahead of Wall Street in the form of an STOXX 600 slipping 1.1 percentage being swayed by cloud-based software and chipmakers companies. In Asia the Nikkei 225 fell 1.4 percent as did Hong the Hong Kong’s Hang Seng Index dropped 1.9 percent as a result of the ongoing concerns about the property market in China and a slow expansion prospects.
Safe Havens Attract Flows
The departure of equity investments boosted defense assets. The U.S. 10-year Treasury yield decreased to 4.18 percent, and the dollar index jumped 0.5 percent, indicating an investor’s prudence. Gold climbed 0.3 percent, to $1.930 an ounce and oil gained only modestly as Brent crude trading at the mark of $83 for a barrel.
AI-related trade shows Refuse to Work
The bulk of the equity market rally this year is based on a fervor about artificial intelligence. This week’s decline raised doubts concerning excessive valuations trading profits from semiconductors and software companies that had risen into record-setting levels. “The AI trade isn’t dead,” one analyst said, “but investors are realizing the Fed still matters more than the hype cycle.”
Outlook All Eyes on Jackson Hole
With earnings season coming to an end and data on economic growth varied, the markets are focused on Powell’s outlook to come later in the week. If Powell’s message is hawkish, it could cause an additional shift out of the tech sector and into more defensive industries, whereas an even slight tilt towards dovish could rekindle risk-aversion. Investors are reluctant to gamble and are reducing positions prior to the potential for a crucial time for markets across the globe.
