Selling pressure persisted across US equity markets as investors grew increasingly cautious about the sustainability of elevated technology stock valuations. Risk appetite weakened, prompting a shift in focus to Washington, where the U.S. Supreme Court held a key hearing on presidential authority over tariffs.
The development reignited political risk discussions and pushed implied volatility higher, reflecting broader investor unease around both policy uncertainty and market valuations.
Tech-Led Pressure
The U.S. equity market extended its weekly losses with the S&P 500 closing 1.1% lower and the Nasdaq 100 sliding nearly 2%. Tech stocks once again led the decline as markets reassessed whether the momentum that carried valuations could be maintained. The shift in sentiment effectively capped the months-long rally that had been fueled by optimism over resilient US growth, robust earnings and supportive monetary stance. Yet the pullback also underscores that the market is questioning whether price-to-earnings multiples near 30x on benchmark tech names can remain justified.
Economic Data Meets Political Risk
The decline can be understood through a dual lens. Economically, the Challenger, Gray & Christmas report showed heavy October job cut rising to their highest level since 2003, raising doubts over labor-market weakness at a time when official data remains absent by the government shutdown. Politically, the spotlight fell on the Supreme Court’s hearing over the president’s authority to unilaterally impose tariffs under the International Emergency Economic Powers Act. The justices voiced skepticism about the constitutionality of such broad powers, signaling a potential shift in how U.S. trade policy could be conducted in the future.
While investors may view tariffs enforcement process as a secondary issue, given now existing agreements and alternative executive tools within the While House toolkit, the implications are far reaching. Curbs on Washington’s ability to use tariffs as a rapid negotiation lever could narrow the U.S. administration’s tactical flexibility in trade policy and gradually recalibrate the balance of power between Washington and Beijing in 2026.
Market Reaction
This week’s pullback is not a structural breakdown but rather a reality check. High beta tech and AI names are now highly sensitive to minor shifts in sentiment or flow. The roughly 2% drop in Nasdaq reflects more of a reaction to market valuation than fundamental deterioration. The absence of a meaningful spike in the VIX index further supports that view, investor positioning remains largely intact, and much of the selling appears to be profit-taking rather than broad deleveraging.
Gold Building a Base
Gold continues to consolidate below the 4000-per-ounce level, showing little signs of distress. The structure below 4,000 remains technically healthy with the 50 day moving average catching up to spot levels, a setup that has attracted renewed inflows from technical traders six times this year.
The macro backdrop remains supportive despite Trump’s largely symbolic Asian visit, which preserved the status quo. The Fed’s softer tone about December rate cut in December has tempered optimism, yet front end liquidity tightness and talks of secondary market purchases (QE in all but name) offset some of that caution. In sum, sub 4000 remains a constructive accumulation range for medium term holders.
Selective Reality
This selling pressure is best viewed as a healthy reset, a reality check after a period of overconfidence in rapid gains. It presents an opportunity to reevaluate exposures and reposition for a more selective phase.