NEW YORK — Global financial markets experienced a severe shock this week as Wall Street was battered by an aggressive sell-off in artificial intelligence and technology shares. The sudden market reversal triggered a broad flight to safety, driving massive capital inflows into U.S. government bonds and bullion.

The turbulence followed the U.S. midterm elections, where the Democratic party secured full control of both chambers of Congress. Investors quickly grew anxious that the political shift would usher in stricter regulatory frameworks for the AI sector and potentially curb massive data center infrastructure spending.

Historic Nasdaq Plunge and Semiconductor Rout

The carnage on equity markets was widespread and steep. On Thursday, the tech-heavy Nasdaq Composite Index suffered a staggering 5.5% loss, while the S&P 500 tumbled 4.4% and the Dow Jones Industrial Average retreated 3.4%. According to data compiled by The Wall Street Journal, the single-day contraction wiped out roughly $2.5 trillion in market value across Nasdaq-listed enterprises—marking the largest absolute daily loss in history.

The Philadelphia Semiconductor Index (SOX) bore the brunt of the downturn, plummeting 12.2% to close at 9,011.14. This represented the index's steepest single-session percentage drop since March 16, 2020, and pushed it to a seven-month closing low. The SOX has now crashed 38.4% from its yearly peak of 14,634.72 recorded on June 22.

Reflecting escalating market anxiety, the CBOE Volatility Index (VIX)—widely tracked as Wall Street’s fear gauge—surged nearly 69.7% to finish at 28.18, after hitting an intraday peak of 28.36, its highest reading in eight months.

Treasury Yields Plummet on Safe-Haven Demand

As equities bled value, fixed-income assets rallied sharply. U.S. Treasury yields tumbled across the entire curve on November 5, falling by as much as 12 basis points to touch their lowest baseline since early September.

Market indicators showed the 2-year Treasury yield tumbling 12 basis points in a single day, moving from 4.58% down to 4.46%. Meanwhile, the benchmark 10-year yield drifted lower by roughly 6 basis points to settle near 4.82%. Bond yields move inversely to prices, meaning the sharp drop reflects heavy buying pressure. Option market traders are already pricing in further declines, with positioning targeted at the 10-year yield sliding to 4.70% by next week or 4.35% later in the month.

Spillover Effects and Safe-Haven Currencies

The risk-off shockwaves quickly reverberated beyond American borders. Analysts warn that export-driven Asian economies deeply integrated into the AI hardware supply chain—such as South Korea, Taiwan, and Japan—face mounting downward pressures as global investors de-risk their portfolios.

In foreign exchange markets, the safe-haven Japanese yen outperformed, climbing 0.46% against the U.S. dollar to 157.63. The yen's strength was supported by growing expectations of monetary tightening by the Bank of Japan, compounded by the global rush for safety. Conversely, the benchmark U.S. dollar index remained virtually flat at 101.49, weighed down by falling Treasury yields.

Precious metals also captured strong defensive bids. Spot gold advanced 1% to $4,100.27 per ounce, touching an intraday high of $4,146.63—its strongest level in over two weeks. Lower bond yields reduced the opportunity cost of holding non-yielding bullion, bolstering its appeal amid macroeconomic uncertainty.

Fed Rate Path Reevaluated

The financial market tremor has also altered expectations surrounding Federal Reserve monetary policy. While consensus still points toward a potential 0.25 percentage point rate cut or adjustment at the upcoming December 9 meeting, short-term rate option contracts increasingly priced in the possibility of a pause. Bets on aggressive monetary tightening heading into the next year have notably receded.

"Today is clearly a risk-off event," noted Gregory Faranello, head of macro strategy at South Street Securities Holdings. "While we are not aggressively chasing long-term duration at these precise levels, we are paying close respect to how fixed income is behaving relative to risk assets right now."

[ⓒ Global Economic Times. 무단전재-재배포 금지]