Tech Sell-Off Deepens, Futures Slide Amid Rate-Cut Bets and Oversupply Concerns

Index Update:  U.S. stocks fell sharply on Thursday, with the Dow down 0.84%, the S&P 500 off 1.12%, and the Nasdaq dropping 1.9%, led by steep losses in major AI stocks like Nvidia, AMD, and Palantir. The sell-off reflected renewed fears over inflated AI valuations and signs of a weakening labor market, as October job cuts surged to a 22-year high. With the government shutdown limiting official data, investors relied on private reports indicating softer economic conditions. All major indexes are on pace to finish the week lower, with the Nasdaq down 2.83% so far.

Market Movers:  On Thursday, the top gainers were Forge Global Holdings, Inc. (+68.72%), followed by Aimei Health Technology Co., Ltd (+60.89%). On the contrary Energys Group Limited. (-67.59%), and Aspen Aerogels, Inc. (-44.53%) declined the most the same day.

Commodities Update:  Oil prices edged higher on Friday but remained on track for a second consecutive weekly loss amid concerns of oversupply and weak demand. WTI traded near $60 per barrel and Brent around $64, as rising OPEC+ and non-OPEC production outweighed lingering supply risks from U.S. sanctions on Russian oil and Ukraine’s attacks on Russian energy sites. Saudi Arabia’s price cuts for Asian buyers further highlighted the oversupplied market, while India and China adjusted crude imports amid sanctions-related disruptions. Meanwhile, gold prices climbed to around $4,000 per ounce after weak U.S. labor data boosted expectations of a near-term Federal Reserve rate cut. Job cuts surged in October, signaling softening demand and increasing bets on a December rate reduction. A weaker dollar and ongoing economic uncertainty supported gold’s safe-haven appeal, though weekly performance remained subdued.

Macro Updates:  The U.S. is proceeding with President Trump’s plan to pause penalties on China’s shipbuilding industry as part of an interim trade agreement with President Xi Jinping. The U.S. Trade Representative has invited public input on a one-year truce suspending tariffs on Chinese imports like ship-to-shore cranes and merchant ships docking at U.S. ports. In exchange, China will halt its retaliatory measures, effectively freezing new tariffs or penalties related to the U.S. probe into China’s maritime and logistics sectors for a year.

Bonds Commentary:  The 10-year U.S. Treasury yield fell to 4.08% from a one-month high of 4.16% as weak labor data strengthened expectations of a Federal Reserve rate cut next month. October layoffs surged to a 20-year high, pointing to softer consumer demand and corporate cost-cutting. While this bolstered the dovish case within the Fed, persistent inflation and solid economic activity kept about 30% of markets expecting no policy change. The ISM Services PMI and prices both rose, signaling resilience, while the Treasury indicated it would prioritize issuing more short-term bills as the Fed increases purchases of short securities to offset MBS runoff.

Futures Update:  U.S. stock futures fell on Friday, reversing earlier gains and signaling continued market volatility amid concerns over high valuations. Dow futures were down 0.3%, S&P 500 futures dropped 0.5%, and Nasdaq 100 futures slipped 0.6%. The decline follows Thursday’s sell-off led by weakness in technology stocks, reigniting worries about the sustainability of their elevated valuations.

After experiencing downward pressure early in the session, stocks continued to weaken throughout much of Thursday's trading day. The S&P 500 dropped 75.99 points, or 1.12%, closing at 6,720.31. From a technical standpoint, the index encountered resistance at key levels and gradually declined, indicating the potential for further downside movement. There is a possibility that stocks may continue to decline in the near term. Additionally, the 14-day Relative Strength Index (RSI) is falling below critical levels, further supporting a negative outlook. Key support levels are around 6,666, with resistance expected near 6,750.