Wall Street Plunges 200 Points: Nvidia Rally Fizzles, Tech Sell-Off Rocks US Markets & Impacts Australian Shares

Wall Street Plunges 200 Points: Nvidia Rally Fizzles, Tech Sell-Off Rocks US & Australian Markets

Investors on Wall Street faced an extremely volatile trading session overnight, as an initial surge fueled by Nvidia's impressive earnings quickly evaporated, giving way to a significant market sell-off. This dramatic reversal is expected to heavily influence the Australian share market, which had previously reacted positively to Nvidia's strong performance, now poised for a downward adjustment following the New York downturn.

A Wild Night on US Markets

What began with promising gains for US markets swiftly transformed into a challenging period. The S&P 500 index saw a remarkable swing of over 200 points during the session. After opening with a healthy 1.4% increase and peaking at more than 1.9% higher, the benchmark index commenced a prolonged slide in the late morning (US time), effectively erasing and then reversing all its earlier gains. By the end of trading, the S&P 500 was down 1% to 6,578 points. The technology-heavy Nasdaq also suffered, closing down 1.4%, despite the prior day's positive news from chipmaker Nvidia.

The "Fear Index" Rises

Adding to the market's unease was a sharp increase in the VIX index, often referred to as Wall Street's "fear index" due to its correlation with market volatility. The VIX soared above 25, hitting peaks close to 28 overnight. These levels haven't been consistently observed since April, a period marked by significant concerns surrounding trade relations between the world's largest economies during the early stages of President Trump's trade war.

From "Buy the Dip" to "Sell the Rally"

Recent market trends have often seen investors "buy the dip" in major AI-related tech stocks. However, the overnight session indicated a shift, with traders seemingly opting to "sell the rally" after these same stocks initially bounced on Nvidia's positive results. This change in investor sentiment suggests growing caution in the tech sector.

Impact on Australian Markets

The ripple effect is set to hit Australian shores. The ASX SPI 200 futures, which yesterday reflected the optimism surrounding Nvidia, are now pointing towards a steep decline when the market opens at 10:00 am AEDT. The index is currently off 1.4% to 8,450 points, signaling a turbulent start for Australian investors.