A global selloff in stocks extended into a fourth day as investors, concerned about lofty tech valuations, shifted away from riskier assets in the run-up to Nvidia Corp.’s earnings and a key US jobs report later this week.
The MSCI All Country World Index hovered around a one-month low. Asian shares fell 1.2% — led by technology firms — and are on track for a third straight day of losses. More than two stocks fell for every one that rose. That’s after the S&P 500 index dropped 0.9% and the Nasdaq 100 shed 0.8%. In a further sign of weak sentiment, Bitcoin traded around $91,500 — levels last seen in April.
In other corners of the market, a gauge of the dollar held its gains from the prior session, while gold posted a fourth day of losses, underpinned by fading expectations of a Federal Reserve interest-rate cut next month. Lower interest rates typically make non-yielding bullion more appealing to investors.
The moves highlighted lingering uncertainty over interest rates and tech earnings, with Nvidia’s Wednesday report set to test investor nerves over lofty valuations surrounding the artificial intelligence sector. Attention will then shift to the delayed September jobs report due Thursday, which will provide investors with clues on the Fed’s policy outlook.
“The monthly jobs report would normally dominate this week’s economic calendar, but with the AI trade struggling the past couple of weeks, Nvidia’s earnings are once again looking like a key piece of the market’s momentum puzzle,” said Chris Larkin at E*Trade from Morgan Stanley.
Alarm bells are ringing for analysts who study chart patterns in the US stock market, fueling concern that the latest dip could swell into a full-blown correction of at least 10%.
A sharp selloff in the S&P 500 on Monday extended the decline from its last record on Oct. 28 to 3.2%. The benchmark index closed below its 50-day moving average for the first time in 139 sessions, breaking the second-longest stretch of this century above the closely watched trend line.
The Nasdaq Composite Index is also flashing some “ugly” signals, according to John Roque, head of technical analysis at 22V Research. More of the index’s some 3,300 members trade at 52-week lows than highs, he said, a sign of internal market weakness that makes a further rally unlikely.
“It has been a great year in general for investors, however nerves are clearly increasing into the year end,” said Nick Twidale, chief market analyst at AT Global Markets in Sydney. “We may see further volatility in the next few weeks as we hit the Christmas trading period.”
Nvidia’s shares also fell in US trading after a filing showed Peter Thiel’s hedge fund sold its stake in the chipmaker during the third quarter.
“While we should expect an eventual reckoning for blindly throwing trillions of dollars at AI capital expenditures with no clear path to profitability, markets are unlikely to tip over while the Fed is still in easing mode and the economy is still strong,” said Dennis Follmer at Montis Financial.
The path for rate cuts is the other major theme investors are concerned about amid conflicting views from central bank officials.
Fed Vice Chair Philip Jefferson said he sees risks to the labor market as skewed to the downside, but warned policymakers need to proceed slowly. Fed Governor Christopher Waller is backing a cut in December, citing weak jobs. Traders are pricing in about a 40% chance of a rate cut next month.
“Fed officials continue to voice concerns over sticky inflation, emphasizing that the current information vacuum makes it difficult to assess the economy’s true momentum,” Dilin Wu, a strategist at Pepperstone Group Ltd., wrote in a note.
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