US stocks crash at open: Nasdaq down 1.2%, S&P down 0.8%

US equities declined on Thursday, with the S&P 500 falling 0.8% and Nasdaq 1.2%, driven by extended losses in Oracle and Nvidia amid renewed doubts over the AI trade's durability and rising 10-year Treasury yields toward 4.19%. This market reaction occurred despite robust economic data showing jobless claims falling to a two-month low of 218,000 and Q2 GDP being revised upward to 3.8%, as investors brace for Friday's Personal Consumption Expenditures (PCE) price index release.

Analysis

US equity markets are exhibiting a notable divergence between weakening investor sentiment in key technology sectors and strengthening macroeconomic data. The Nasdaq Composite's 1.2% decline, outpacing the S&P 500's 0.8% drop, is primarily driven by a repricing of the artificial intelligence trade, as evidenced by significant losses in Oracle (ORCL, -6%) and Nvidia (NVDA, -2%). Oracle's slump, now exceeding 10% from its recent peak, was intensified by a Rothschild Redburn sell rating that projects a 40% pullback, citing investor overestimation of AI's impact on its cloud business. This tech-focused sell-off is compounded by rising bond yields, with the 10-year Treasury approaching 4.19%. In stark contrast to this market weakness, economic indicators point to unexpected resilience. Initial jobless claims fell to a two-month low of 218,000, well below consensus, and Q2 GDP was revised upward to a robust 3.8%. This strong economic footing challenges the Federal Reserve's recent rationale for rate cuts and creates a cautious environment as investors await Friday's Personal Consumption Expenditures (PCE) price index.

Key Decisions for Investors

• Re-evaluate exposure to high-multiple artificial intelligence stocks like Oracle and Nvidia, as they are facing specific analyst downgrades and broader questions about the durability of recent gains.
• Monitor the upcoming PCE inflation report closely, as the combination of a resilient labor market and rising Treasury yields could challenge the market's expectation for further Fed rate cuts and increase volatility.
• Consider trimming positions in rate-sensitive growth sectors that are underperforming due to rising yields and hedge against near-term uncertainty stemming from the conflicting signals between market momentum and economic data.