US Stocks Suffer Consecutive Drops: What Factors Are Weighing on Markets Apart from Middle East Tensions?

The escalating risk of geopolitical conflict in the Middle East has once again hit the market on Monday. US Treasury yields saw a sharp rise with the benchmark $U.S. 10-Year Treasury Notes Yield(US10Y.BD)$ touching its highest level in five months. Risk assets plummeted with the $Nasdaq Composite Index(.IXIC.US)$ falling sharply by 1.8%, marking its largest decline in two months. The $S&P 500 Index(.SPX.US)$ fell 2.64% over the past two trading days, marking its largest two-day drop since the collapse of Silicon Valley Bank. The $Dow Jones Industrial Average(.DJI.US)$ fell for six consecutive days. $Tesla(TSLA.US)$ fell 5.6% to an 11-month low, leading the decline of the "Magnificent Seven." Bitcoin took a dive and dropped below $63,000.

Even if CTA does not reach the stop-loss level, recent days of consecutive declines and significant volatility in the stock market may also prompt Equity Vol Control strategy to dramatically reduce equity exposure, and the potential for leveraged ETFs and inverse ETFs to make significant adjustments will further release selling pressure. Data shows that the $CBOE Volatility S&P 500 Index(.VIX.US)$, known as the fear gauge, has surged to nearly 20, skyrocketing nearly 60% in less than a month.

The steadfast belief in AI had strongly supported the market's strong performance throughout the year 2023 and the first quarter of this year. However, this excitement is now cooling down. In general, a stock that falls more than 10% from its high is considered to enter a correction phase. After $Tesla(TSLA.US)$ and $Apple(AAPL.US)$ both entered correction phases, last week the AI darling, $NVIDIA(NVDA.US)$ also followed suit. At the same time, as the US Department of Justice and the European Union launched antitrust investigations into large tech stocks, including Apple, Google, and Meta, potential regulatory risks have also made investors cautious.