The S&P 500 fell sharply by 1.44% in yesterday’s session, marking its second consecutive decline, while the Nasdaq also dropped 2.21% as selling pressure was concentrated in technology and semiconductor stocks.
Former market leaders such as Tesla (-5.79%), Nvidia (-4.13%), Alphabet (-1.09%), and Apple (-0.91%) all moved lower, reflecting growing investor caution after a prolonged rally in stocks benefiting from the AI boom.
This pullback was not driven solely by technical factors or normal profit-taking, but also reflected a repricing of expectations for growth stocks.
After a strong rally, valuations across many technology companies have become increasingly sensitive to unfavourable macroeconomic signals.
Against the backdrop of the Fed maintaining a hawkish stance, while the U.S. dollar and Treasury yields remain stable at elevated levels, capital costs continue to weigh on high-valuation assets, particularly technology and semiconductor stocks.
However, the latest move still appears to be more of a short-term correction than a clear confirmation of a longer-term downtrend. The fact that some defensive sectors, such as consumer staples, continued to perform positively suggests that capital is not leaving the market altogether, but is instead being reallocated from overheated segments into more stable areas. In other words, the market is entering a phase of reassessing risk appetite after expectations surrounding AI and monetary policy have already been largely priced in.
In the near term, the S&P 500 may remain under pressure and extend its correction toward the 7,200-point area if selling pressure in technology and semiconductor stocks does not ease soon, while U.S. Treasury yields and the DXY remain elevated. This will be an important support zone to watch. If the index manages to hold this area and buying interest returns to megacap technology stocks, the current decline could be viewed as a healthy rebalancing phase after a prolonged rally, rather than a signal of a major trend reversal.
Conversely, if the S&P 500 clearly loses the 7,200-point level, profit-taking pressure could spread further across other sectors, increasing the risk of a deeper correction in the following sessions.
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