• S&P 500 extends losses to over 2.2%, while the Nasdaq 100 slides 4.1%, driven by tech and AI-related weakness.
  • Investor risk appetite fades amid rising rate expectations and disappointing guidance from big-cap tech firms.
  • The sell-off reflects broader concerns over valuation discipline and global growth jitters.

The S&P 500 extended its decline to more than 2.2% on Thursday, with the Nasdaq 100 plunging 4.1%, as renewed risk-off sentiment swept through markets. The tech-heavy indices led the rout, with investors reassessing high-flying AI names and growth expectations after a series of cautious earnings guidance from major technology companies. According to people familiar with the matter, the selling pressure was exacerbated by automated trading algorithms and options-related hedging, amplifying the downturn in the final hours of trading.

The sell-off comes as interest rate expectations remain elevated, with the 10-year Treasury yield hovering near 4.7%. Divergent signals between near-term policy actions and long-term inflation expectations have steepened the yield curve, impacting equity valuations, particularly for growth-oriented tech stocks. Global growth jitters, fueled by uneven economic data and geopolitical tensions, have further dampened investor appetite.

“The market is repricing the AI trade,” said a senior portfolio manager at a major asset manager, who asked not to be named because they are not authorized to speak publicly. “We’ve seen a shift from exuberance to realism, and until earnings stabilize, volatility will likely persist.” Analysts note that sectors like semiconductors and AI-adjacent firms, which had enjoyed outsized gains this year, are now facing margin pressures and supply chain headwinds.

Commodity and currency moves are adding to the volatility, with oil prices sliding 3% on demand concerns and the dollar strengthening, which typically weighs on multinational earnings. Sector rotations are underway as investors pivot to defensive stocks and value plays, but the breadth of the decline suggests a broad-based risk aversion.

Looking ahead, market participants will focus on upcoming earnings reports from major tech names and AI leaders, as well as central bank commentary for clues on rate paths. Economic indicators, including inflation data and employment figures, will also be critical in shaping near-term direction. “Without a clear catalyst, we could see further downside in the short term,” the portfolio manager added.

Correction: An earlier version of this article incorrectly stated the Nasdaq 100 drop as 3.9%. It has been updated to reflect the 4.1% decline.