November 18, 2025

Market Sell-Off Spreads as AI Stocks Face Reality Check; Fed Decision Looms

Market Snapshot

📉 S&P 500: 6,672.41 (-0.92%)
📉 Dow Jones Industrial Average: Futures (-0.81%)
📉 NASDAQ Composite: (-0.84%)
US 10-Year Treasury: 4.142%
📉 Gold: (-1.00%)
📉 Bitcoin: (Below $90,000)

Broad Market Sell-Off Driven by Fed Uncertainty

A pervasive market sell-off has taken hold as investors reduce risk ahead of key earnings reports and economic data. The downturn has impacted a wide range of assets, including stocks, cryptocurrencies, and gold. Major US indices fell, with the S&P 500 breaking below its 50-day moving average for the first time in 139 trading sessions and moving into negative territory for the fourth quarter. The selling pressure was broad, with 407 of the S&P 500's constituents declining on Monday.

The market’s direction appears heavily dependent on the US Federal Reserve's next move, as policymakers are publicly divided on whether to continue cutting interest rates in December. Fed Governor Christopher Waller has indicated a focus on the weakening labour market, suggesting support for a cut, while Vice Chair Philip Jefferson has advocated for a cautious approach. This uncertainty has seen the market-implied probability of a December rate cut fall below 50%.

In contrast to the equity and crypto markets, the bond market is experiencing a strong year. The Bloomberg US Aggregate Bond Index has generated a total return of approximately 6.7% in 2025, its best performance since 2020, attributed to cooling inflation and a softening labour market. However, a significant $1.8 trillion fiscal deficit raises concerns about the long-term impact of heavy government borrowing. Bucking the negative trend, a localised view of manufacturing activity in New York state surged to a one-year high, smashing expectations.

AI and Tech Sector Faces a Reality Check

The prolonged rally in artificial intelligence stocks is encountering significant turbulence as investors shift focus from hype to fundamental financial health. This 'great shakeout' has seen companies with strong balance sheets and positive cash flow outperform those reliant on future promises. Alphabet (Google) CEO Sundar Pichai acknowledged that while the current wave of AI investment is an “extraordinary moment,” there are “elements of irrationality” in the market and warned that no company would be unscathed if the boom unravels.

Reflecting this shift, Alphabet's shares climbed 3% after Berkshire Hathaway revealed a new $4.93 billion stake. In contrast, Berkshire continued to trim its stake in Apple, which saw its shares slide nearly 2%. Other tech hardware stocks like Dell and Hewlett Packard Enterprise sank more than 7% after a ratings downgrade.

The high costs of AI development are also under scrutiny. Tech giants are spending a large portion of their cash flow on capital expenditures, with Amazon recently raising $15 billion in a bond offering to fund its data centre expansion.

Nvidia Under the Microscope

All eyes are on chipmaker Nvidia ahead of its third-quarter earnings report this week. Any sign of a muted outlook could disproportionately affect the market, given the high expectations set by previous guidance. Adding to the pressure, Peter Thiel's hedge fund, Thiel Macro LLC, sold its entire $100 million stake in Nvidia last quarter, citing concerns of an investment bubble. Nvidia's shares fell nearly 2% following the news.

Cryptocurrency Market in Turmoil

The downturn in Bitcoin has had a cascading effect on publicly listed companies that hold the cryptocurrency. Despite the slump, MicroStrategy announced it purchased an additional 8,178 Bitcoin last week for $836 million. The recent rally that attracted a new wave of investors is also close to going underwater, with the average cost basis for Bitcoin ETF investors nearing their collective purchase price of approximately $89,600.

Sentiment has been further dampened by significant capital flight. Global crypto investment products saw $2 billion in outflows last week, the largest weekly exit since February. The US accounted for 97% of these redemptions, with Bitcoin funds seeing $1.38 billion in withdrawals and Ethereum funds losing $689 million.

Despite a 25% drop from its October all-time high, Bitcoin's recent slide is viewed by some analysts as a short-term correction rather than a signal of weakening fundamentals. Long-term holder selling has been absorbed by ETF inflows and corporate treasuries, with institutional ETF ownership climbing to 28%. Meanwhile, the Ethereum ecosystem continues to develop, with a proposed fix for its 'blob' data pricing and Polygon emerging as a leader in peer-to-peer payments with 40% market share.

Global Economy Overshadowed by US Tariff Ruling

The global economic landscape faces mounting uncertainty, with markets closely watching a US Supreme Court case that could axe many of the Trump-era tariffs. The case concerns tariffs imposed under the International Emergency Economic Powers Act (IEEPA), which constitute roughly 50% of total US tariff revenue in 2025. A decision is expected before the end of the court's term in June 2026, with most experts anticipating a ruling in early 2026.

General consensus among legal experts and prediction markets is that there is a high probability the Supreme Court will rule against the tariffs. Such a decision would likely see risk assets, such as stocks in China and other emerging markets, rally on the prospect of improved global trade. Industrial commodities may also react positively, while the US Treasury market could see yields rise due to a better growth outlook and a worsening US government fiscal position.

This legal battle unfolds against a backdrop of existing trade pressures. A late-October trade detente between the U.S. and China appears fragile, while in Japan, the economy has contracted at a 1.8% annual rate, primarily due to U.S. tariffs slashing the country's exports and investment. Elsewhere, India's trade deficit soared to a record $41.7 billion in October, driven by a surge in gold imports and a decline in exports.

Corporate and Sector Highlights

Retailers Signal Consumer Weakness: Home Depot missed analysts' expectations for third-quarter earnings and cut its full-year profit outlook, citing “ongoing consumer uncertainty” and “continued pressure in housing”. The report raises concerns ahead of earnings from other major retailers including Lowe’s, Target, and Walmart.
Weight-Loss Drug Price War: A price war is intensifying between Novo Nordisk and Eli Lilly, with Novo Nordisk slashing the cash price of its drug Wegovy to as low as $199 per month to capture uninsured patients.
Chinese EV Market: Chinese electric vehicle manufacturer XPeng warned of a weak fourth-quarter revenue outlook, citing fierce competition in China's EV market. Its US-listed shares dropped over 10%.
Gold Leasing: Wealthy investors are leasing gold bars to refiners and jewellers in exchange for interest payments, transforming the traditionally non-yielding asset into an income-generating one.
Panera Bread Turnaround: The fast-casual chain has launched a new turnaround strategy, “Panera RISE,” to improve service and update its menu in an effort to combat falling traffic.

Other Developments

Former US Treasury Secretary Larry Summers announced he is stepping back from public commitments after his emails with sex offender Jeffrey Epstein were released. Summers, a former president of Harvard University and current OpenAI board member, said he was “deeply ashamed” of his actions and took full responsibility for his “misguided decision” to continue communicating with Epstein.

NOTE: This content is for informational and educational purposes only and does not constitute financial advice. Always do your own research. Not financial advice (NFA).