Amid dual concerns over the Federal Reserve's hawkish stance and elevated tech valuations, U.S. stocks experienced a sharp selloff, with the S&P 500's market capitalization briefly losing $1 trillion.

The tech-led selling pressure has continued to build this week, driving U.S. markets lower for the fourth consecutive trading session. On Tuesday, an MIT report triggered the S&P 500's largest single-day decline since early August. During Wednesday's session, risk-off sentiment reached a crescendo as both the S&P 500 and Nasdaq 100 posted significant losses ahead of the Federal Reserve meeting minutes release.

NVIDIA fell nearly 4% before the minutes were published, though losses narrowed considerably afterward. Palantir Technologies Inc., often viewed as a barometer for speculative appetite in U.S. equities, dropped more than 9% intraday, bringing its cumulative decline from the August 12 close to as much as 23.87%. Despite recovering some losses following the minutes release, Palantir Technologies Inc. still posted its sixth consecutive daily decline, marking the longest losing streak since April 2024.

The July Federal Reserve meeting minutes revealed that while officials acknowledged dual risks of rising inflation and weakening employment, "most participants judged that upside risks to inflation were the larger of the two."

Analysts suggest that with the Fed meeting minutes now public and uncertainty resolved, investor focus has quickly shifted to Federal Reserve Chair Powell's speech at Jackson Hole on Friday, with markets seeking additional clues about future policy direction.

**Tech "Leaders" Turn Lower**

For months, large-cap technology stocks have been the absolute driving force behind U.S. equity gains, benefiting from robust demand for artificial intelligence products and cloud computing services.

However, they are now becoming the "laggards" dragging down broader indices. This rapid role reversal has sparked concerns about concentration risk.

Some strategists warn that tech stocks' outsized weighting could transform sector rotation into a market-wide rout. Matt Maley of Miller Tabak stated:

"Rotation depends on tech stocks stabilizing. If they continue declining, the only rotation we'll see is investors moving to cash."

He added:

"We're not sounding yellow alerts yet until we see more downtrend, but if the tech sector does start experiencing material declines, investors could quickly become very nervous."

Mark Hackett of Nationwide noted that after U.S. equities gained as much as 30% since April, investors are showing signs of fatigue. He commented:

"We're seeing clear deterioration in market breadth, with large-cap growth significantly underperforming small-caps and value stocks this month. However, volatility and credit spreads remain calm, suggesting limited investor concern."

**Profit-Taking or Buying Opportunity?**

Faced with consecutive market pullbacks, investor opinions have become divided.

One camp views the decline as a rare buying opportunity. JPMorgan's Andrew Tyler believes Powell's speech could shift market direction, stating:

"Today feels like a test for dip buyers, with Thursday's PMI data and Fed Chair Powell's Jackson Hole speech potentially serving as market drivers or narrative changers."

Additionally, some analysts believe tech stocks' downside may be limited because "global central banks are easing policy, providing support for global equities."

However, another camp argues that with current market valuations becoming excessive, profit-taking has taken priority over continued risk-taking.

Carol Schleif of BMO Private Wealth Management summarized the current market predicament, noting that stock prices have "fully" priced in future positives, leaving little room for error. She observed:

"The stock market is currently pricing in a bright future, largely justified by earnings far exceeding expectations and increasingly clear trade and tax policies."

But this also means any disappointing news could easily shatter the market's fragile balance.