The sell-off of technology stocks intensified, with the S&P 500's market value evaporating by one trillion dollars at one point, and Palantir Tech plummeting 9% during the session

Under the dual concerns of the Federal Reserve's hawkish stance and the high valuations of technology stocks, the U.S. stock market has experienced a severe sell-off, with the market capitalization of the S&P 500 index evaporating by a trillion dollars at one point.

Since this week, the sell-off led by technology stocks has continued to escalate, pushing the U.S. stock market down for the fourth consecutive trading day. On Tuesday, the MIT report triggered the S&P 500 index to record its largest single-day drop since early August. On Wednesday, during intraday trading, risk aversion peaked, with both the S&P 500 and Nasdaq 100 indices sharply declining before the release of the Federal Reserve's meeting minutes.

NVIDIA fell nearly 4% before the release of the meeting minutes, but the decline was significantly narrowed afterward. As a barometer of speculative enthusiasm in U.S. stocks, Palantir saw its maximum intraday drop exceed 9%, with a cumulative decline of up to 23.87% compared to the closing price on August 12. Although Palantir's decline narrowed after the release of the minutes, its stock price has fallen for six consecutive days, marking the longest losing streak since April 2024.

(Price trends of NVIDIA and Palantir)

Wall Street Insight reported that the Federal Reserve's July meeting minutes showed, although officials noted the dual risks of rising inflation and weak employment, "most participants believed that the upside risk of inflation is the greater of the two."

Analysts believe that with the release of the Federal Reserve's meeting minutes and the uncertainty resolved, investors' focus quickly shifted to Fed Chairman Jerome Powell's speech this Friday in Jackson Hole, with the market expecting to find more clues about future policy directions.

Technology Stocks "Leaders" Turn Around

For months, large technology stocks have been the absolute mainstay of the U.S. stock market's rise, benefiting from strong demand for artificial intelligence products and cloud computing services.

However, they are now becoming the "leading decliners" that weigh down the market. This rapid role reversal has raised concerns about concentration risk in the market.

Some strategists warn that the ultra-high weight of technology stocks may cause fund rotation within the sector to evolve into a rout affecting the entire market. Matt Maley of Miller Tabak stated:

The premise of fund rotation is that technology stocks can stabilize; if they continue to decline, the only direction we will see for rotation is investors holding cash.

He added:

A yellow alert will not be sounded until we see more downward trends, but if the technology sector does indeed start to experience substantial declines, investors may quickly become very nervous Mark Hackett from Nationwide stated that after a 30% increase in U.S. stocks since April, investors are beginning to show signs of fatigue. He said:

We have seen a significant decline in leading stocks, with large-cap growth stocks lagging behind small-cap and value stocks this month. However, volatility and credit spreads remain calm, indicating limited investor concerns.

Profit-taking or Buying Opportunity?

In the face of continuous market pullbacks, investor opinions have diverged.

One side views this decline as a rare buying opportunity. JP Morgan's Andrew Tyler believes that Powell's speech could change the market direction, stating:

Today feels like a test for dip buyers, and Thursday's PMI data and Federal Reserve Chairman Powell's speech at Jackson Hole could be market drivers or narrative changers.

Additionally, some analysts believe that the downside for tech stocks may be limited, as "global central banks are easing policies, which provides support for global stock markets."

However, the other side argues that due to current market valuations becoming too high, profit-taking has taken precedence over continuing to bear risks.

Carol Schleif from BMO Private Wealth Management summarized the current market situation, stating that stock prices have "fully" priced in future positives, leaving almost no room for error in the market. He pointed out:

The stock market is currently pricing in a bright future, thanks to earnings that have exceeded expectations and increasingly clear trade and tax policies, which is largely a reasonable assessment.

But this also means that any disappointing news could easily disrupt the market's fragile balance