Sometimes there are days in the financial markets when literally everything turns against investors. Today was just such a day.
Not only the crypt collapsed, but everything at once.
The S&P 500 fell by 1.65%, leaving $1.14 trillion in capitalization.
The Nasdaq fell 2.60%, losing $1.11 trillion.
Gold fell by 3.38% (minus $1 trillion of capitalization).
Silver fell by 6.9% (minus $280 billion).
Bitcoin fell by 6.31%, losing $80 billion.
In total, 2.5 trillion dollars evaporated in one trading session.
There is a "funny" reason for this decline: the economy is too good.
It all started in the morning with the report on the US labor market. It turned out that in May, the American economy created 172,000 jobs, although Wall Street created almost half as many: only 88,000.
Normally, a strong labor market is a cause for joy and good news. But not now, when inflation stubbornly remains at the level of 3.8%, and Brent oil costs $90 per barrel. For the Fed, such figures mean one thing: the economy is overheated. You can forget about lowering interest rates, moreover, they may have to be raised.
The probability of a rate increase this year jumped from 40% to 57% in just one day. For the technology sector and growth stocks, this has become a cold shower: the higher the rates, the cheaper these companies are in the eyes of long-term investors.
Then the main driver of the market of the last year cracked - the artificial intelligence industry.
The day before, the giant Broadcom reported record revenue (up 48%) and explosive sales of AI chips (up 143%). It would seem, success. But the company's shares fell by 12.6% after the news. The reason is simple: the management did not start to raise the forecasts for revenue from AI until the end of the year. Investors, accustomed to constant records, asked themselves a question that they had avoided for a long time: "Are we not paying too much for these shares?".
The study of the analytical firm SemiAnalysis added fuel to the fire. Experts have found out that next-generation AI chips from Nvidia require significantly less memory than the market expected, about half as much. But this memory is the bread and butter of such Asian giants as SK Hynix and Samsung.
The reaction followed immediately: SK Hynix's shares fell by almost 10%, Samsung's by more than 6%. After them, the entire stock market of South Korea collapsed by 5.5%, dragging Japanese semiconductor manufacturers with it.
The final touch for the AI sector was the presentation by Anthropic. The company warned that AI is rapidly approaching the point where it can improve itself without human intervention, and called for a global pause in development.
Against the background of the news about the decrease in demand for memory and modest forecasts of Broadcom, this gave rise to the main fear: what if technologies develop faster than business models manage to monetize them?
While attention was focused on quotations, behind the scenes the liquidity problem worsened, which few people talk about out loud.
Next week, SpaceX plans to go public with an initial capitalization of $1.75 trillion.
Anthropic has also already applied for an IPO, and OpenAI is next in line.
Together, these three giants are worth $4 to $5 trillion.
To enter these historic IPOs, large funds need colossal amounts of cash.
But the managers' free cash reserves are now at a minimum since the beginning of 2024.
There is only one way out - to sell what is already growing in portfolios. It was this hidden cash sale that happened today.
To top it all off, in 11 days the first meeting of the Fed will be held under the chairmanship of the new head Kevin Warsh. Donald Trump appointed him with the clear intention of lowering rates.
However, Warsh enters the cabinet when inflation is high, oil is expensive, and the labor market is breaking records. Investors simply do not understand what decision he will make. And when the policy of the most powerful Central Bank in the world is at stake, and there is no certainty, the most reasonable course of action for major players is to reduce risks and go to cash.
Conclusion 👇
Today, all possible negative factors have come together: hot statistics from the USA, the collapse of the truce in the geopolitical arena, doubts in the AI sector, a trillion-dollar liquidity deficit and complete uncertainty before the Fed meeting.
The market simply decided to take a break and play it safe.