Financial Analyst/Content Writer, RADEX MARKETS
Lawrence J. came from a strong technical and engineering background before pivoting into a more financial role later on in his career. Always interested in international finance, Lawrence is experienced in both traditional markets as well as the emerging crypto markets. He now serves as the financial writer for RADEX MARKETS.
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US stock markets got absolutely destroyed on Thursday. In a move that completely erased Wednesday’s post-election rally, yesterday saw some of the most relentless selling pressure observed in years. The Nasdaq-100 underwent a staggering 6.4% collapse after tech investors rushed for the exit, representing the worst loss in percentage terms since the Covid crash back in March 2020 and wiping out over $2 trillion in market value. The index is now 15% down from its October record high. The technology sector got hammered across the board, with no one escaping unscathed. The Magnificent Seven shed a combined $1 trillion in market cap, with Nvidia (NVDA) being responsible for almost half the damage after solidifying a 9.3% loss. Chip manufacturers were unceremoniously led to the slaughterhouse, causing Sandisk (SNDK) to crater 22%, AMD, Micron (MU) and Western Digital (WDC) to plummet 17% and Seagate (STX) to settle 16% lower. Elon Musk’s companies were also crushed, with Tesla (TSLA) falling the better part of 11% and SpaceX (SPCX) taking a 9% hit.
While a complete shutdown on AI data centre construction remains very unlikely, a number of Democrat politicians have voiced concern over such enterprises, enough to spook investors that harsher times may be approaching. Wall Street suddenly decided that anti-AI fears were in fact real enough to warrant a bout of profit-taking, which was subsequently exacerbated by an unhealthy amount of leverage being violently unwound. As prices began to fall, algorithmic trading took hold, resulting in tech stocks being summarily abandoned by leveraged ETFs to reduce exposure. The volatility index climbed to nearly 70% during the session – the third largest spike in recent history – while rumours surfaced that a number of prominent hedge funds and institutional players were facing liquidation as a result of the erratic price action. The S&P 500 and Dow Jones had no safe haven to offer, themselves incurring 4.4% and 3.4% losses respectively by the end of the session.
The tech bloodbath spilled over into Asian stock markets this morning, dragging the Kospi index down to an 8.5% loss, which triggered the first 20-minute circuit-breaker as early as 9am local time. The Korean index is now down 47% from record highs and has hit a circuit breaker ten times so far this year. The Japanese stock market fared little better, as the Nikkei 225 fell over 7% earlier today, matching levels not seen since April. In Taiwan, TSMC (2330) initially opened 10% lower as the day’s trading got underway, but buyers were quick to step in to stabilise the loss.
The whiplash in stock markets was mirrored by the price action in cryptocurrencies, which tumbled on Thursday evening in tandem with the drama unfolding in traditional markets. Bitcoin fell from highs of $81k to lows of $75k yesterday, which, all things considered, is relatively modest compared to the kind of damage seen in most semiconductor stocks. Over a billion dollars in leveraged bets were wiped out yesterday, illustrating well the perilous position cryptocurrencies found themselves in going into Thursday’s session. Whether or not the carnage continues later today remains to be seen, but for now at least the leverage has largely been cleared out.
Structural accounting delays may prolong the unwinding of leverage on Wall Street, which faces the additional danger of the latest non-farm payrolls report dropping mere hours from now. Traders are not out of the woods just yet.
About the Author
Lawrence J. came from a strong technical and engineering background before pivoting into a more financial role later on in his career. Always interested in international finance, Lawrence is experienced in both traditional markets as well as the emerging crypto markets. He now serves as the financial writer for RADEX MARKETS.
Reviewed by RADEX MARKETS
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