Nvidia-Led Tech Slide Cracks Summer Calm in Stocks: Markets Wrap
(Bloomberg) — Wall Street’s summer calm cracked as a selloff in big tech dragged down stocks, underscoring the American market’s narrow reliance on a handful of growth giants.
The Nasdaq 100 slid 1.4% — its second-worst drop since April’s tariff shock — led by a 3.5% rout in Nvidia Corp. That pressure overwhelmed gains in over 350 shares in the S&P 500, exposing the fragility of an index propped up by megacaps. Home Depot Inc.’s results lifted big-box retailers while Intel Corp. jumped as the US is ironing out details of a deal to take a 10% stake.
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Treasuries rose ahead of Jerome Powell’s Jackson Hole speech Friday, with traders firming up bets on a September cut. Ten-year yields slid three basis points to 4.30%. S&P Global Ratings said revenues from tariffs will help soften the blow to the US’s fiscal health from tax cuts, enabling it to maintain its credit grade. The crypto world joined a slide in risky assets.
Positioning across US equity markets remains at elevated levels following a strong reporting season, according to Citigroup Inc.’s Chris Montagu. At Citadel Securities, Scott Rubner said individual investors are likely to slow their torrid pace of stock buying in September before resuming later this year.
“It is always easier when the markets are going up,” said Nicholas Bohnsack at Strategas. “It is difficult to poke holes in the bull case; the path of least resistance is likely higher, but we find ourselves increasingly worried that traditional risk assets (stocks and bonds) appear priced to perfection.”
Options traders worried about tech weakness after a torrid surge have been trying to protect themselves with “disaster” puts on the Invesco QQQ Trust Series 1 ETF, according to Jeff Jacobson at 22V Research. A measure showing the difference between the cost of hedging against a sharp downturn and a smaller one is at an almost three-year high.
Stretched valuations are partly to blame for the selloff. The Nasdaq 100 is trading at 27 times expected profits in the next 12 months, according to data compiled by Bloomberg.
Bank of America Corp. strategists led by Michael Hartnett have recently said the rally that’s propelled the so-called Magnificent Seven stocks higher from April lows looks stretched. Hartnett has repeatedly warned of a bubble risk in US shares this year.
At Apollo, Torsten Slok says AI will have a significant impact on our lives and productivity. But that doesn’t mean that the tech companies in the S&P 500 are correctly priced. The current situation is surprisingly similar to the tech bubble in the 1990s.
The technology sector reclaimed its spot as the S&P 500’s top performer last quarter, helping indexes rise to all-time highs. Yet to Bret Kenwell at eToro, while valuations appear stretched, elevated growth expectations help justify prices. Meantime, AI enthusiasm as well as momentum can help keep tech in the driver’s seat, he said.
“Whether money continues to flow into the ‘Magnificent Seven’ leaders or rotate within the group, investors will likely look for tech’s continued leadership in the second half of 2025,” he noted.
Much of the recent run-up in tech stocks is an underpinning of strong corporate fundamentals, said Stephen Schwartz at Pioneer Financial, who believes there are legs to the tech rally amid a continued capex boom related to the AI buildout.
“The market has experienced a powerful move off the April lows thanks to policy clarity, upside earnings surprises, and the expectation of lower rates,” he said. “We believe the AI power engine will continue to deliver strong earnings momentum throughout the balance of ’26 pushing stocks to higher levels.”
Meantime, traders are gearing up for Powell’s speech on Friday in Jackson Hole, Wyoming, with the Treasury market seeing a quarter-point rate cut next month as virtually a lock and at least one more by year-end.
“As the market readies for Powell’s speech at Jackson Hole, we’ll argue that the biggest risk for Treasuries is if the Fed chief chooses to throw cold water on the widely anticipated September rate cut,” said Ian Lyngen at BMO Capital Markets.
While this is not Lyngen’s base-case scenario, he says the front-end of the curve is vulnerable to a correction if Powell doesn’t deliver on the degree of dovishness currently anticipated.
Investors are waiting to see if Powell affirms the market pricing — or pushes back with a reminder that new data arriving before the next policy gathering could change the picture. They’re also looking for clues about the longer-run trajectory of Fed cuts into next year.
A couple of weeks ago, when the latest jobs report revealed a slump in hiring, the case for lower rates appeared all but closed. Then came the sharpest spike in US wholesale prices in three years – fuel for the concern about tariff-led inflation that’s kept Fed officials on hold so far this year.
While the recent inflation data has been volatile with some conflicting signals, Schwartz says there’s a market perception that the inflation surge from 2022 is behind us.
“While we expect some near-term volatility, we believe markets will continue to move past the inflation situation, and that the economy and the US consumer are strong enough to continue growing,” he said.
At Bank of America Corp., strategists including Mark Cabana and Meghan Swiber say they don’t think Powell will sound as dovish as the market expects.
“Powell’s reaction function to recent stagflationary data will be key,” they noted. “Will he be spooked by jobs revisions or lean into the labor supply slowdown?”
In an interview with Bloomberg Television, Fed Governor Michelle Bowman deflected when asked if she would be interested in leading the central bank as chair.
On the geopolitical front, President Donald Trump urged Russia’s Vladimir Putin and Ukraine’s Volodymyr Zelenskiy to show some “flexibility” as the US president accelerates his efforts to end the war in Ukraine and encourages the two leaders to hold a bilateral summit.
“While there’s a sense that the path to peace is at least slightly clearer, traders remain wary,” said Fawad Razaqzada at City Index and Forex.com. “And rightly so – the toughest conversations, namely over territory, still lie ahead.”
Corporate Highlights:
Microsoft Corp. employees have started setting up a protest encampment at the company’s Redmond, Washington, headquarters, ratcheting up a campaign calling for company to stop doing business with Israel over its war in Gaza. SoftBank Group Corp. agreed to buy $2 billion of Intel Corp. stock, a surprise deal to shore up a struggling US name while boosting its own chip ambitions. Meta Platforms Inc. is splitting its newly formed artificial intelligence group into four distinct teams and reassigning many of the company’s existing AI employees, an attempt to better capitalize on billions of dollars’ worth of recently acquired talent. Palo Alto Networks Inc. gave a stronger-than-expected annual forecast, as the company seeks to provide customers with a bundle of AI-enabled cybersecurity products to fend off attacks. Apple Inc. is expanding iPhone production in India at five factories, including a pair of recently opened plants, as it seeks to lessen its reliance on China for US-bound models. Tesla Inc. priced its new six-seat Model Y sport utility vehicle in the same range as local rival Li Auto Inc.’s extended-range L8 model to win over middle-class families in China’s hyper-competitive market. Commerce Secretary Howard Lutnick said he’d support consolidation as a means to make the US freight rail industry more efficient, a potential boost for Union Pacific Corp.’s $72 billion takeover of Norfolk Southern Corp. Ford Motor Co. and South Korea’s SK On are seeking buyers for excess battery supply produced at their new joint-venture Kentucky factory, underscoring the waning demand for electric vehicles in the US. Viking Therapeutics Inc.’s experimental obesity pill disappointed in a mid-stage study, marking another weaker-than-expected result for an oral alternative to popular weight-loss injections. Anglo American Plc suffered a major setback to its restructuring plans after Peabody Energy Corp. decided to walk away from a $3.8 billion deal to buy its steelmaking coal business following a fire at an Australian mine. US power and natural gas utilities Black Hills Corp. and NorthWestern Energy Group agreed to merge in a $3.6 billion deal that underscores the boom for electricity demand that’s being unleashed by data centers. Nexstar Media Group Inc. has agreed to buy TV station operator Tegna Inc. for $3.5 billion in a cash deal that stands to dramatically expand Nexstar’s reach to 80% of US households and test the Trump administration’s appetite for consolidation. Medtronic Plc will expand its board after Elliott Investment Management became one of its biggest investors. The medical devices maker also reported profit that beat estimates and lifted full-year earnings guidance. What Bloomberg Strategists say…
“The Fed’s current stance of remaining open to rate cuts because of benign inflation data is the Goldilocks scenario that’s both keeping the Treasury curve from steepening, and allowing the Magnificent Seven earnings and wider S&P 500 margin story to reign supreme.”
— Edward Harrison, Macro Strategist, Markets Live.
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Some of the main moves in markets:
Stocks
The S&P 500 fell 0.6% as of 4 p.m. New York time The Nasdaq 100 fell 1.4% The Dow Jones Industrial Average was little changed The MSCI World Index fell 0.4% Bloomberg Magnificent 7 Total Return Index fell 1.7% The Russell 2000 Index fell 0.8% S&P 500 Equal Weighted Index rose 0.5% Intel rose 7% Currencies
The Bloomberg Dollar Spot Index rose 0.1% The euro fell 0.1% to $1.1647 The British pound fell 0.1% to $1.3490 The Japanese yen rose 0.2% to 147.61 per dollar Cryptocurrencies
Bitcoin fell 2.9% to $113,108.39 Ether fell 4.4% to $4,142.68 Bonds
The yield on 10-year Treasuries declined three basis points to 4.30% Germany’s 10-year yield declined one basis point to 2.75% Britain’s 10-year yield was little changed at 4.74% The yield on 2-year Treasuries declined one basis point to 3.75% The yield on 30-year Treasuries declined three basis points to 4.90% Commodities
West Texas Intermediate crude fell 1.5% to $62.44 a barrel Spot gold fell 0.5% to $3,316.09 an ounce ©2025 Bloomberg L.P.
