① This Wednesday was undoubtedly the most thrilling trading day of the year for Wall Street investors;
② The Big Seven experienced the worst day since the launch of ChatGPT;
③The S&P 500’s longest streak of not falling 2% since the global financial crisis in 2007 has come to an end.
Cailian Press reported on July 24 that this Wednesday was undoubtedly the most thrilling trading day of the year for Wall Street investors: the super-high-tech large-cap stocks that have been booming in the past two years have officially fallen into the 10% correction range, and the S&P 500 index's longest consecutive record of not falling 2% since the global financial crisis in 2007 has come to an end.
Market data showed that the S&P 500 fell 2.3% on Wednesday, breaking its "golden body" of not falling 2% or more for 356 consecutive trading days since February 2023. The Dow Jones Industrial Average also fell 504 points, or 1.2%, on the same day. The Nasdaq Composite Index, which is concentrated in technology stocks, fell 3.6%, marking the largest single-day drop since October 2022.
As the stock market plummeted, the Cboe Volatility Index (VIX), known as the "fear index," soared to 18.46 points overnight, hitting a new high since the end of April. Data from Trade Alert showed that the turnover rate of VIX options on Tuesday was almost twice the usual level.
Many industry insiders pointed out that this latest round of sell-off on Wednesday highlighted the vulnerability of the U.S. stock market to any weakness of large technology stocks, which has raised concerns about overvaluation and reminded people of the Internet bubble more than 20 years ago.
Wednesday's market decline was driven by a 12% plunge in Tesla's stock price, which posted its biggest drop since September 2020 as its second-quarter profit fell short of expectations. In addition, weak YouTube advertising revenue at Google's parent company Alphabet also exacerbated the market sell-off, with Google Class A shares closing down more than 5% that day. Investors began to question whether the high valuations of technology stocks are reasonable.
According to industry statistics, on Wednesday this week, the "Big Seven" as a whole suffered the largest single-day drop since October 2022. Given that the starting point of this round of AI wave was ChatGPT, which came out in November 2022, it can also be said that this is the biggest setback encountered by the "Big Seven" since the explosion of this round of AI market.
Data shows that since hitting the latest peak on July 10, the "Big Seven" has fallen by more than 10% as of Wednesday's close, entering the technical correction range for the first time since October. In the past 10 trading days, the market value of the "Big Seven" has evaporated by a total of $1.7 trillion, which is almost equivalent to the "death" of an Amazon.
In fact, overnight, all of the "Big Seven" stocks fell, which in itself is an extremely rare event in recent years.
In the first half of this year, the AI boom pushed U.S. stocks to new highs, but as the recent U.S. stock rotation has gradually emerged, investors have suddenly become more skeptical about the potential valuations of the leading technology giants. Steve Clayton, head of equity funds at Hargreaves Lansdown, said: "The mid-term earnings season has begun, and investors have been disappointed with what they have seen so far. Investors question whether the huge amounts of money invested in AI capabilities are really bringing returns."
Kim Caughey Forrest, founder and chief investment officer of Bokeh Capital Partners, said in an interview on Wednesday: "There are signs that it will take longer for tech giants to see a return on their investments in artificial intelligence. To me, this is the key to changing the market."
Regarding the performance of the current earnings season, David Lundgren, portfolio manager at Little Harbor Advisors, also pointed out that "the performance of technology giants cannot just meet expectations, you have to exceed expectations. Frankly speaking, you have to exceed Wall Street's forecast numbers for earnings reports."
It is worth mentioning that, affected by the risk aversion sentiment in the U.S. stock market and the rising expectations of the Federal Reserve's interest rate cut, the trend of the U.S. Treasury market overnight also showed a relatively obvious differentiation: short-term U.S. Treasury bonds were sought after by market funds, while long-term bonds were sold off.
The 2-year/10-year Treasury yield spread was last reported at -13.4 basis points, having hit -13.0 basis points earlier, the mildest inversion since October 23 last year. In addition, the 30-year Treasury yield once exceeded the 5-year Treasury yield by about 38 basis points, the steepest shape of the curve since May 2023, indicating that investors believe the Fed may cut interest rates earlier and faster than expected.
As of the end of the New York session, U.S. Treasury yields closed mixed, with the 2-year Treasury yield falling 5.7 basis points to 4.443%, the 3-year Treasury yield falling 1 basis point to 4.269%, the 5-year Treasury yield rising 1.4 basis points to 4.18%, the 10-year Treasury yield rising 4 basis points to 4.293%, and the 30-year Treasury yield rising 6.4 basis points to 4.549%.
On the macro news front, data released earlier on Wednesday showed that U.S. business activity expanded at the fastest pace in more than two years in early July, but manufacturing indicators returned to contraction. New home sales unexpectedly fell for the second consecutive month in June. Many investors also paid attention to former New York Fed President William Dudley's call for a rate cut. Dudley wrote in his column that the Fed should cut interest rates as soon as possible, preferably next week.
Investors are currently awaiting the release of the U.S. second-quarter gross domestic product (GDP) report on Thursday and the PCE price index for June on Friday, which will provide more clues to the Fed's interest rate path.
This article is from Cailianshe , edited by Xiaoxiang, and published by 36Kr with authorization.
