US Stocks Tumble as Tech Sell-Off Deepens – Nasdaq Down 2.86%
US equity markets finished the trading week under significant pressure on Friday, with technology stocks once again leading the declines as growing concerns over artificial intelligence expenditure continued to weigh heavily on investor sentiment. The Nasdaq suffered the largest losses, plunging 2.86% to close at 25,437, while the broader S&P 500 dropped 1.82% to finish at 7,580. The Dow Jones also came under pressure, falling 1.09% to close at 51,770. Investors remain increasingly concerned about the substantial levels of capital expenditure being committed to AI development and the potential impact on profitability.
US Treasury markets experienced a relatively subdued session despite the significant declines in equities, with yields edging marginally lower across the curve. The policy-sensitive 2-year Treasury yield slipped 1.0 basis point to close at 4.588%, while the benchmark 10-year yield declined 0.8 basis points to finish at 4.929%. Meanwhile, the US dollar recovered some ground against the major currencies, with the Dollar Index gaining 0.11% to close at 101.96.
Oil prices pushed sharply higher again on Friday as escalating hostilities in the Middle East raised further concerns over potential disruptions to global energy supplies. Reports that a tanker had been struck in the Strait of Hormuz marked the latest escalation in the conflict, increasing fears surrounding the security of one of the world’s most important oil transportation routes. Brent crude gained 2.37% to close at $113.43 per barrel, while West Texas Intermediate rose 2.08% to finish at $104.12.
Gold prices experienced another significant decline, with the precious metal plunging 3.62% to close at $3,875.02. The latest sell-off saw gold extend its recent losses and move further below the psychologically important $4,000 level, despite ongoing geopolitical uncertainty. The magnitude of the decline highlights the considerable selling pressure currently affecting the market, with traders now closely monitoring whether prices can establish support around current levels or whether further downside momentum will emerge.
US Midterm Elections in Focus for Traders
US financial markets are heading into another potentially volatile week as traders turn their attention to the US midterm elections on Tuesday. With control of both the House of Representatives and the Senate at stake, the outcome could have significant implications for President Trump’s economic agenda and, therefore, US markets in particular and global markets in general.
Recent polling suggests the Democrats are favourites to regain control of the House, while the Senate remains much more finely balanced. This means some degree of political gridlock is being factored into market expectations, and a surprise Republican victory or a stronger-than-expected Democratic sweep could generate the biggest immediate reactions.
A Democratic sweep is likely to put pressure on the dollar and Treasury yields in the short term, whilst a stronger-than-expected showing from the Republicans should see the dollar and yields push higher. It is the longer-term impact that will probably provide greater volatility as the market adjusts to a new setup in the US government.
As always, the biggest moves may come from a result that differs significantly from market expectations. With the Federal Reserve’s December interest rate decision approaching, ongoing concerns over inflation and escalating tensions in the Middle East, the elections add another major potential catalyst for volatility this week and into the final quarter.
Quiet Start to a Busy Week Ahead
Looking ahead, the economic calendar is relatively quiet to begin the trading week. Today, there is nothing of note on the cards in either the Asian or London sessions, and just the US ISM Manufacturing PMI (exp. 54.7) is scheduled for release in the New York session.
However, geopolitical developments are expected to remain the dominant driver of market sentiment, particularly following the latest escalation in the Strait of Hormuz. With concerns surrounding technology sector valuations continuing to weigh on equities and energy prices remaining elevated, traders are preparing for another potentially volatile session across global financial markets.
