This Wednesday is undoubtedly the most thrilling trading day of the year for Wall Street investors: the super technology large-cap stocks that have been soaring in the past two years have officially fallen into the 10% correction range. At the same time, the S&P 500 Index has not experienced a 2% decline since the 2007 global financial crisis.


Market data shows that the S&P 500 index fell 2.3% on Wednesday. Since February 2023, the "golden body" of 356 consecutive trading days without a decline of 2% or more has been broken. The Dow also fell 504 points that day, or 1.2%. The Nasdaq Composite Index, which is concentrated in technology stocks, fell 3.6%, recording its largest single-day decline since October 2022.


As the stock market plummeted, the Cboe Volatility Index VIX, known as the "fear index," soared to 18.46 points overnight, setting a new high since the end of April. Data from TradeAlert showed that VIX options on TuesdayThe turnover rate is almost twice as high as usual.


Many industry insiders pointed out that Wednesday's latest round of selling highlighted the vulnerability of the U.S. stock market to any weakness in large technology stocks, which is raising concerns about overvaluation and is reminiscent of the Internet bubble more than two decades ago.

Wednesday's market decline was driven by a 12% drop in Tesla's stock price. As second-quarter profits fell short of expectations, Trump's stock price hit the biggest drop since September 2020 that day. In addition, Google parent company Alphabet.'s YouTube advertising revenue showed weakness, which also exacerbated the market sell-off. Google Class A shares closed down more than 5% that day. Investors are beginning to question whether the sky-high valuations of technology stocks are justified.

According to industry statistics, on Wednesday, the "Big Seven" as a whole suffered their largest single-day decline since October 2022. Considering that the starting point of this round of AI wave is ChatGPT, which will be released in November 2022, it can be said that this is the biggest setback encountered by the "Big Seven" since the detonation of this round of AI market.


Data show that since hitting its latest peak on July 10, the "Big Seven" have fallen by more than 10% as of Wednesday's close, entering a technical correction range for the first time since October. In the past 10 trading days, the market value of the "Big Seven" has evaporated by a total of 1.7 trillion US dollars, which is almost equivalent to the "killing" of an Amazon.

In fact,Overnight, all of the "Big Seven" stocks fell, which itself is an extremely rare event in recent years.


In the first half of this year, the artificial intelligence boom once pushed U.S. stocks to new highs. However, as the recent rotation of U.S. stocks gradually emerged, investors suddenly became more skeptical about the potential valuations of the technology giants that led the gains. HargreavesLansdownSteve Clayton, director of equity funds, said: "The mid-term earnings season has begun and investors are disappointed with what they have seen so far. Investors are questioning whether the huge sums of money invested in AI capabilities are really delivering returns."

Kim Caughey Forrest, founder and chief investment officer of Bokeh Capital Partners, said in an interview on Wednesday: "There are signs that it will take longer for technology giants to see a return on investment in artificial intelligence. To me, this is the key to changing the market."

Regarding the performance of the current financial reporting season, Little Harbor Advisors portfolio manager David Lundgren also pointed out, "The performance of technology giants cannot just meet expectations, you must exceed expectations. Frankly speaking, you must exceed Wall Street's forecast numbers for financial reports."

It is worth mentioning that, affected by the risk aversion sentiment in the U.S. stock market, andAs expectations of interest rate cuts by the Federal Reserve continue to rise, the trend of the U.S. bond market has also become more obvious overnight: short-term U.S. bonds have been sought after by market funds, while long-term bonds have suffered a sell-off.

The 2-year/10-year U.S. Treasury yield difference was last at -13.4 basis points, having hit -13.0 basis points earlier, the lightest inversion since October 23 last year. In addition, the 30-year U.S. Treasury yield once exceeded the 5-year U.S. Treasury yield by about 38 basis points during the session, making the curve the steepest since May 2023, indicating that investors believe the Federal Reserve may cut interest rates earlier and faster than expected.


As of the end of the New York session, U.S. Treasury yields closed mixed, with the 2-year U.S. Treasury yield falling 5.7 basis points to 4.443%, the 3-year U.S. Treasury yield falling 1 basis point to 4.269%, and the 5-year U.S. Treasury yield falling 1 basis point to 4.269%. The 10-year U.S. Treasury yield rose 1.4 basis points to 4.18%, the 10-year U.S. Treasury yield rose 4 basis points to 4.293%, and the 30-year U.S. Treasury yield rose 6.4 basis points to 4.549%.


In terms of macro news, data released earlier on Wednesday showed that U.S. business activity expanded at the fastest pace in more than two years in early July, but manufacturing indicators returned to contraction territory. New home sales unexpectedly fell for the second consecutive month in June. Many investors are also paying attention to former New York Fed President William Dudley's call for interest rate cuts. Dudley wrote in his column that the Fed should cut interest rates as soon as possible, preferably next week.

For now, investors are still awaiting U.S. second-quarter data due out on Thursday.The gross domestic product (GDP) report and the performance of the PCE price index for June due out on Friday will provide guidance for the Fed.The path of interest rates provides further clues.