Nasdaq Plunges

The Nasdaq suffered its largest one-day loss yesterday since October 2022, with the index shedding around 3.69% on the day. The plunge was mainly linked to bearish sentiment on the back of weaker-than-forecast results from Tesla and Google. Disappointing results further weakened confidence among big tech names fuelling a sharp unwinding of positions as traders question the expected profitability of AI investments.

S&P Down Too

Losses weren’t just limited to the techs sector either. There was widespread weakness in stock markets yesterday with the S&P suffering heavy losses too in response to earnings misses within the consumer discretionary space and some stark warnings over demand in the restaurant sector.

Fed Easing Expectations

The sell off in stocks comes despite a strong uptick in Fed easing expectations. The market is now pricing in an initial cut in September along with two further cuts ahead of year-end. However, with uncertainty around the US elections landscape dominating focus currently, easing expectations are not offering the support they might typically.

US Data on Watch

Looking ahead, focus over the remainder of the week will be on key US data (preliminary Q2 GDP, weekly unemployment claims today, core PCE tomorrow). Any fresh weakness should underpin easing expectations though, given the negative sentiment gripping markets currently, any rebound is expected to be minor.

Technical Views

Nasdaq

The sell off in the Nasdaq has seen the index breaking sharply lower. Price plunged below the 19,723. Level yesterday and is now close to testing the bull channel lows and the 18,686.50 level beneath. With momentum studies bearish, focus is on continued downside for now.