Investors eye valuation concerns while trimming risk-heavy positions
Wall Street extended its losses this week as investors pulled back from risk-heavy assets, particularly technology stocks, ahead of Federal Reserve chair Jerome Powell’s anticipated speech at the Jackson Hole Symposium on Friday.
The sell-off, which began Tuesday, dragged the S&P 500 down 0.6% and the Nasdaq Composite 1.5%, according to the Associated Press. Nvidia led the downturn with a 3.5% drop, its sharpest decline in nearly four months. Palantir Technologies fell 9.4%, while Meta Platforms dipped 2.1%. Other large-cap tech names — including Apple, Amazon, Tesla, Microsoft, Alphabet, and Broadcom — also posted losses, Investopedia reported.
“This week’s tech sell-off looks less like panic and more like a broad reshuffling of risk,” said Bruno Schneller, managing director at Erlen Capital Management. He noted that crypto, high-beta tech, and AI-linked stocks all came under pressure, indicating a widespread reduction in exposure to risk assets.
Hedge fund managers cited profit-taking as a driving force, with asset managers selling off earlier winners. This trend extended overseas, with declines in Korean tech stocks and Chinese biotech shares earlier in the week.
Seasonal factors are also weighing on sentiment. Historically, September has been a challenging month for equities, with stock buying often slowing as retail participation declines and companies pause share buybacks for regulatory reasons. “After a summer of strong positioning and relentless upside, September historically brings a shift,” said Scott Rubner, head of equity and equity derivatives strategy at Citadel Securities.
Some investors point to valuation concerns as another reason for the pullback. “Mostly, we've run out of catalysts to buy more. Valuations are high,” said Dan Izzo, founder of hedge fund BLKBRD.
Bond markets reflected caution as well. The yield on the 10-year Treasury slipped to 4.29% on Wednesday from 4.30% a day earlier, data from Investopedia showed. Bitcoin traded around $114,300, down from last week’s record high of $124,500.
Attention is now on Powell’s remarks for clues on the Fed’s next steps. Traders widely expect a rate cut in September, but some analysts warn that Powell may avoid firm guidance or even raise concerns about stagflation risks. Bank of America strategists noted that Powell “may not sound as inclined to cut interest rates as the market is expecting.”
Investopedia reported that, Target shares fell more than 6% after announcing a leadership change despite reporting stronger-than-expected earnings. TJX Cos. rose nearly 3% after raising its profit outlook, while Lowe’s shares were little changed despite posting better-than-expected results. In commodities, West Texas Intermediate crude futures climbed 1.3% to $63.15 a barrel, and gold gained 1% to around $3,390 an ounce.
Market participants remain cautious, with many reassessing positions as the quarter-end approaches, anticipating signals from the Fed that could set the tone for the remainder of the year.
