- US stocks took a sharp downturn, with the Nasdaq sliding nearly 2%, the S&P 500 losing 1.1%, and the Dow dropping around 0.8%.
- The sell-off was driven by a plunge in Big Tech, with chipmakers like Nvidia and AMD leading the decline amid concerns over AI valuations.
- Alarming jobs data revealed October had the worst layoff announcements since 2003, fueling economic anxiety and a flight to bonds.
- Comments from a Trump administration official ruling out a federal bailout for the AI industry further spooked tech investors.
Tech Tumbles on AI Jitters
The tech-heavy Nasdaq Composite led the major indices lower, plummeting nearly 2% as investor confidence in the high-flying artificial intelligence sector faltered. Shares of megacap chip giants like Nvidia (NVDA) and AMD (AMD) saw significant declines, dragging the broader market down with them.
The sell-off intensified after David Sacks, the Trump administration’s AI and crypto czar, explicitly stated there would be “no federal bailout” for the AI industry. The comments, made on the social media platform X, came after OpenAI’s CFO alluded to a potential federal backstop for new chip investments, a notion later denied by CEO Sam Altman.
Valuation Concerns Persist
Even strong earnings couldn’t shield some tech companies from the pessimistic sentiment. Chipmaker Qualcomm (QCOM) posted robust earnings and upbeat guidance, yet its stock still slid over 4%, reflecting widespread investor concern that tech valuations have become too lofty.
Labor Market Woes Spook Investors
Adding to the market’s anxiety, a bearish jobs report from global outplacement firm Challenger, Gray & Christmas revealed that October was the worst month for layoff announcements since 2003. The report showed employers announced 153,074 cuts last month, a stark increase from the previous year, with the technology sector leading the layoffs.
This grim data on the labor market spurred a flight to safety, with investors moving capital into bonds. Consequently, the benchmark 10-year Treasury yield dipped below 4.1% as demand for the safer assets surged.
Broader Market Pressures
Beyond tech and jobs data, other uncertainties contributed to the volatile trading session. Investors kept a close watch on Tesla’s (TSLA) shareholder meeting, where a crucial vote on CEO Elon Musk’s proposed trillion-dollar pay package was the main event. Worries that Musk might step down if the package is rejected sent Tesla shares down 3.5%.
Additionally, skepticism from several Supreme Court justices on the legality of former President Trump’s sweeping trade tariffs added another layer of unpredictability, with a potential rollback of the duties having an enormous impact on trade and domestic spending.
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