On Wednesday EST, the US stock market experienced the most severe sell-off since 2022. Additionally, the disappointing financial reports of the companies has undermined investors' confidence in large tech stocks, especially the technology sector.$Tesla (TSLA.US)$And.$Alphabet-C (GOOG.US)$The technology sector suffered a major blow when Google's performance has raised concerns about its massive investment in AI-related infrastructure. Moreover, Tesla's profit declined for a second consecutive quarter due to price reductions and increased spending on AI projects, resulting in the Wednesday sell-off of US stocks.

At the close of trading on Wednesday, the S&P 500 fell 2.32%, the largest daily drop since December 2022 and the first time in 356 trading days that a drop of 2% or more has occurred. The Nasdaq, which is mainly dominated by technology stocks, performed worse, falling 3.64% and marking its biggest daily decline since October 2022, ending a historical streak of more than 400 days without a decline of 3% or more.$S&P 500 Index (.SPX.US)$Investors believe that weak real estate market data and former New York Fed Chairman Bill Dudley's worrisome remarks are part of the reason for the market pain. It should be noted that Dudley has long stood on the side of "maintaining high interest rates for longer periods of time", but now believes that the Fed should immediately cut interest rates and take action at next week's policy meeting.

While Dudley's comments were the catalyst for the sell-off, other factors also played a role. The results of three major US companies, first, sounded a new warning for American consumers' purchasing power.

However, the most pressing concern for investors now is how long the sell-off will last. Goldman Sachs' Chief Investment Officer Gene Goldman believes that considering the high valuations of blue-chip stocks, the sell-off was even expected sooner or later and might even be interpreted as beneficial for the market.

Moreover, turning from large-cap stocks to more affordable sectors may help alleviate concerns about market concentration. No matter how long it lasts, the sell-off will eventually provide investors with another buying opportunity, he said.

Goldman also predicted that a similar correction that occurred last year, when the S&P 500 fell briefly into correction territory from its July peak, could happen again.$Visa (V.US)$Beam Capital Partners founder and chief investment officer Kim Caughey Forrest said the financial reports of the three major US companies also helped fuel the sell-off. First, they sounded a new warning for American consumers' purchasing power.

Additionally, Google's performance has raised concerns about its massive investment in AI-related infrastructure, and Tesla's profit declined for a second consecutive quarter due to price reductions and increased spending on AI projects. All these contributed to the Wednesday sell-off of US stocks.

However, how long the sell-off will last is the most pressing concern for investors now.

Goldman said that considering the high valuations of blue-chip stocks, the sell-off was even expected sooner or later and might even be interpreted as beneficial for the market. Regardless of how long it lasts, the sell-off will eventually provide investors with another buying opportunity, he said.

"I told our advisers that the market will experience a pullback, given the combination of high valuations, high expectations, and high concentration in the stock market." The most pressing concern for investors now is how long the sell-off will last. All these contributed to the Wednesday sell-off of US stocks.

He also predicted that a similar correction that occurred last year, when the S&P 500 fell briefly into correction territory from its July peak, could happen again.

Therefore, many risks still exist from now until the fall. Many large US companies will announce their results this week and next. But what investors are most concerned about is perhaps the Fed's meeting next week. Many hope to hear Federal Reserve Chairman Jerome Powell provide some hints that the Fed will begin cutting interest rates in September.

Hooper said that if he did so, it might help alleviate investors' concerns. However, she added that the timing of the market correction is ripe.

"I think this is more like a summer sell-off, because frankly, we should experience a sell-off. We had a very strong rebound, and we haven't seen any obvious decline for a long time." she said.

Beam Capital Management's portfolio manager Mohannad Aama said that if investors are not satisfied with the information he provides next week, there may be more sell-off.

"If the Fed's statement doesn't really suggest a rate cut in September, I think we'll see continued selling," he said.

Editor/ping