US Stock Losses Extend To Asia On AI Valuation Woes: Markets Wrap

The selloff in stocks after a brief Nvidia Corp.-led rally spread from Wall Street to Asia, as renewed concerns over the artificial intelligence sector prompted investors to pull back from riskier assets. Bitcoin weakened.

The Kospi Index — a poster child for AI exuberance — tumbled as much as 4.1% and is poised for its worst week since early March. The Topix in Japan is set for the biggest weekly drop since April as volatility spiked on Wall Street and technology stocks took a beating. Amid the weakness, Bitcoin traded around $87,000, after sinking below that level for the first time since April.

In Asia, attention is also on Japan, where the government is set to unveil a stimulus package. The yen was steady against the dollar as Finance Minister Satsuki Katayama said Japan will consider currency intervention among its options if there are excessive moves.

The sharp reversal in market sentiment came as lingering concerns over stretched valuations and heavy tech spending curbed a rally fueled by Nvidia’s upbeat forecast, with the AI bellwether’s shares sliding 3.2%. Adding to the unease was persistent uncertainty over the Federal Reserve’s ability to cut interest rates next month, as recent remarks from policymakers signaled caution about easing policy too soon.

"We're at a 'show me' point,” said Martin Schulz, head of international equities at Federated Hermes. “Despite all the headwinds — tariff uncertainty, regional war, geopolitical tension and economic slowing — global equity markets have had a strong run. Now it is time for the world’s corporations to deliver on earnings."

The S&P 500 benchmark logged its biggest intraday reversal — at 3.6% — since the height of the tariff turmoil in April, according to data compiled by Bloomberg. The gauge has now fallen 5% from its most recent peak.

Goldman Sachs Group Inc. partner John Flood said that since 1957, there have been eight instances, including Thursday’s, in which the S&P 500 opened more than 1% higher only to reverse and close in the red. On the bright side, average performance after those episodes was positive, with a gain of at least 2.3% in the following day and week and a 4.7% advance in the next month.

Stock market sentiment appeared to stabilise into the Asian day with equity-index futures for the S&P 500 and the Nasdaq 100 edging up 0.2%. Treasuries, which gained across the curve in the prior session, gave up some of their gains. The yield on the 10-year edged up one basis point to 4.09%.

The Cboe Volatility Index rose as high as 28, above the key 20 level that causes concern for traders. The index didn't close at a session high, which suggested "volatility fears are elevated, but not extreme," said Chris Murphy, co-head of derivatives strategy at Susquehanna International Group, in a note late Thursday.

The heightened swings came just ahead of Friday’s expiration of an estimated $3.1 trillion of notional options.

Thursday also brought the release of a long-delayed government employment report, which showed that US job growth picked up in September, while the unemployment rate ticked higher.

The data suggested the labor market showed signs of stabilising before the government shutdown. The figures come a day after minutes from the Fed’s last policy meeting showed a divided committee on whether to cut rates again.

Fed Governor Michael Barr said the US central bank needs to proceed with caution in considering additional rate cuts with inflation still running above the target. Following fresh jobs data, Barr said he sees the labor market 'kind of cooling,' with the economy creating jobs near the so-called break-even pace that keeps unemployment steady.

Fed Bank of Cleveland President Beth Hammack said lowering rates to support the labor market could extend the period of above-target inflation and increase financial stability risks. Her Chicago counterpart Austan Goolsbee signaled that he’s still apprehensive about delivering another rate cut at the central bank’s December meeting.

"Investor concerns over valuations coupled with a mixed employment report dominated sentiment in the session," Nick Twidale, chief market analyst at AT Global Markets in Sydney, said about the US trading day. “It does now feel that we are in a ‘sell rallies’ environment at the moment and the top is in for the rest of the year."