EBC Markets Briefing | Stocks plummet amid souring sentiment toward AI

Global equities dropped on Thursday, with Wall Street's major indexes selling off as US data sparked economic worries and financial stocks in Europe saw their biggest one-day rout since March 2023.

The ISM manufacturing PMI dropped to its lowest since November in July amid a slump in new orders. But it remained above the level that the ISM said over time generally indicates an expansion of the overall economy.

Meanwhile, the number of Americans filing new applications for unemployment benefits increased to an 11-month high last week, suggesting some softening in the labour market. Now all eyes are on the NFP report.

Hedge funds are turning more bearish, as they are mainly reducing their long positions, or bets stocks will rise, while keeping, and in some cases increasing, bets on shares they believe will fall, according to Morgan Stanley.

The VIX jumped to a more than three-month high as stocks slid. The index, which has been largely subdued so far this year, perked up in recent weeks as investors were exhausted by the AI-driven upsurge.

The second-quarter earnings reports from tech companies such as Microsoft and Alphabet have raised concerns that investment in AI infrastructure has led to ballooning costs with only modest gains.

The S&P 500’s sharp decline ground to a halt around 5,390. The medium term uptrend will not be upended until it moves close to the 200 EMA. That being said, bulls might want to see a rally above 5,500 to get back in the market.

EBC Trading Platform Security Disclaimer: This material is for general information purposes only and is not intended as (and should not be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by EBC Online Trading Support or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.