Key Points
- S&P 500 slipped 0.24% to 6,770.73, adding to Tuesday’s 1.2% drop.
- AI-linked mega caps led declines as traders took profits after months of parabolic gains.
- Wall Street CEOs including Jamie Dimon and James Gorman warned valuations may be “unsustainable.”
- Volatility rose to the highest since April as traders rotated into defensives.
- 10-year Treasury yield eased to 4.08%, while gold climbed back above $3,970.
The S&P 500’s rally paused abruptly this week as traders reassessed sky-high valuations amid growing caution from major Wall Street executives. The benchmark fell 1.2% on Tuesday and traded another 0.24% lower at 6,770.73 in the Asian session, following sharp losses across global equities.
Market sentiment shifted as traders questioned whether this year’s AI-fuelled surge could continue without fresh catalysts. Analysts described the pullback as an overdue reset after months of relentless buying pressure.
Mega-cap names that have powered the index higher—Nvidia, Microsoft, Amazon, and Alphabet—faced renewed selling pressure as volatility surged.
The CBOE VIX spiked to its highest level since April, signalling elevated uncertainty ahead of November’s key earnings and inflation data.
Broader Context
The risk-off move rippled through global markets, with Japan’s Nikkei 225 tumbling nearly 7% from its record high before paring losses, and the KOSPI down more than 6% at one point.
Bond markets saw modest inflows as yields eased, with the 10-year Treasury yield slipping to 4.08% from 4.09%, while the Dollar Index (USDX) hovered near a five-month high at 100.25. The rotation into safe havens lifted gold 1% to $3,971.60.
Technical Analysis
The S&P 500 slid to around 6,770, down about 0.24% on thin 15-minute charts — marking a pause after recent highs. The short-term moving averages (5,10,30) are beginning to flatten, hinting at slowing momentum.
Meanwhile, the MACD histogram has started to contract, suggesting that momentum is fading out of the recent up-move.
This pull-back aligns with recent news: leaders at Morgan Stanley and Goldman Sachs warned of potential 10–15% drawdowns in the equity market due to stretched valuations.
At the same time, the market’s earlier impetus — strong earnings and AI-led risk appetite — is now being challenged by questions over whether gains can be sustained.
Outlook
The index remains structurally bullish but tactically overextended, with traders eyeing consolidation before year-end. While the Fed’s December policy meeting and upcoming earnings from Nvidia and Microsoft could steer direction, near-term positioning remains defensive.
Volatility spikes are likely to persist as markets rebalance from AI-driven exuberance toward valuation-conscious trading.
For now, the S&P 500 looks set to trade range-bound between 6,650 and 6,875, with sentiment hinging on whether traders treat this as a healthy correction—or the start of something deeper.
