S&P 500 index fell 1.38% on Wednesday, and Nasdaq 100 index fell 2.9%, reaching the largest single-day decline since December 2022. All seven of the 'Big Tech' weight stocks fell, with Nvidia (NVDA.O) leading the way with a drop of over 6.6%, and Apple (AAPL.O) fell 2.5%. The total market cap of the 'Big Tech' evaporated about $580 billion (approximately RMB 4.21 trillion) in a single day.

Scott Rubner, a strategist at Goldman Sachs, said there was no way out for the S&P 500 index at its current level except to fall. He warned, "I won't buy the dips." Rubner cited data dating back to 1928, saying that Wednesday, July 17th, was a turning point in stock market returns, and August, which followed, was usually the month when funds flowed most severely from passive stocks and mutual funds. Seasonal weaknesses, excessive positioning, and all the good news already digested by the market have left the S&P 500 index on the edge of a summer pullback. This has also been the view of the Goldman Sachs trading division since at least early June.

The managing director of the Goldman Sachs global markets division cited data dating back to 1928 to show that Wednesday, this year's July 17th, was a turning point in stock market returns, and that August, which followed, was usually the month when funds flowed most severely out of passive stocks and mutual funds. Seasonal weaknesses, excessive positioning, and all the good news already digested by the market have left the S&P 500 index on the edge of a summer pullback. This has also been the view of the Goldman Sachs trading division since at least early June.

Rubner wrote in a client report on Wednesday, "Painful trading is no longer upward from here." Rubner wrote that the S&P 500 index is expected to fall after setting 38 historical highs in 2024, making the index likely to be the second highest closing high index in about 100 years, with only 1995 performing better.

The U.S. stock market faces the problem of weak fund inflows and is still susceptible to negative news. Rubner said that as the funds for the third quarter have been deployed, there is no expectation of inflow of passive investors or mutual funds in August. As for trend-tracking system funds, their long positions have reached the maximum, indicating that there is no further room for buying.

In addition, Goldman Sachs said in a report on Wednesday that global hedge funds had reduced their exposure to U.S. stocks for five consecutive days, as large-cap technology stocks generally fell. The report said that the stocks sold by hedge funds in the past five trading days were the highest since November 2022 and close to a five-year record. In addition, the report said that hedge funds sold U.S. technology stocks in seven of the past eight trading days. Goldman Sachs said that the information technology industry is the leader in risk reduction, followed by industry, medical care, non-essential consumer goods, and communications services.

Some investors believe that strong earnings, the possibility that the Fed may cut interest rates in the short term, and an increased chance that Trump will win the U.S. presidential election will again boost the stock market, but Rubner said that these will not be positive catalysts. These events have already been priced into the market, and the high earnings standards of the biggest tech stocks pushing the market to new highs are also very high. He wrote, "When I say high, I mean they have to be excellent."

Rubner recommends that clients buy put options on the Nasdaq 100 index and S&P 500 index that expire in December and look back, which allows holders to exercise at the most favorable price of the underlying asset during the validity period of the option.

Editor/Emily