The ASX is expected to plunge as Wall Street's rally falters, following a week of market volatility and erratic moves. The S&P 500, which initially soared 1.9% on Wednesday, erased all gains and fell 1.6% on Thursday, mirroring the broader market's skittish behavior. The Dow Jones Industrial Average dropped 386 points (0.8%), and the Nasdaq composite sank 2.2%.
In Australia, the ASX is predicted to open 1.7% lower, with futures at 7.59am AEDT indicating a 142-point decline. This comes after the ASX added 1.2% on Thursday, boosted by Nvidia's strong earnings and forecasts, which eased market fears about an AI bubble. However, the market's biggest winners, including Nvidia, cryptocurrencies, and other high-flying sectors, are now facing sharp losses.
The market's volatility is attributed to two main concerns: the potential overvaluation of AI stocks and the possibility that the Federal Reserve may stop its rate cuts, which have been a major driver of Wall Street's rally. Despite Nvidia's impressive earnings and revenue forecasts, investors remain wary of a potential AI bubble, questioning whether the investment in AI chips and data centers will ultimately yield significant profits and productivity.
The recent Bank of America survey of global fund managers revealed a record percentage of investors expressing concerns about overinvestment in companies. This sentiment is reflected in the market's reaction, with tech stocks like Amazon and Palantir Technologies experiencing significant losses. The market's wild swings, reminiscent of April's 'Liberation Day' tariffs, have added to the uncertainty.
On the positive side, Walmart rallied 6.5% after delivering strong sales and profits, attracting cash-strapped Americans despite economic concerns. However, the overall market's losses in tech and crypto sectors, including Robinhood Markets and Coinbase Global, have overshadowed these gains.
In the bond market, the 10-year Treasury yield eased to 4.09%, while stock markets abroad showed resilience, with indexes rising in Europe and Asia. Japan's Nikkei 225 and South Korea's Kospi posted notable gains, indicating a mixed global market sentiment.
