Wall Street collectively confused! US stocks saw the biggest reversal since April, traders are looking for the "culprit" everywhere.

On Thursday, the US stock market experienced its most dramatic intraday reversal since April, with benchmark stock indices falling to their lowest levels in over two months - all of which has left Wall Street traders puzzled, as they explore the exact reasons behind it. Despite the Nasdaq 100 index dropping nearly 5% from its high on that day with no obvious trigger, speculations about the reasons for the sell-off abound. Some traders pointed out concerns about whether artificial intelligence (AI) projects could generate enough revenue or profits to justify their significant technological expenses. Others believed that the belated strong September jobs report was the latest indication that the Federal Reserve would not continue cutting interest rates this year. Some also attributed part of the reason to the signal of risk aversion sent by Bitcoin falling to a six-month low. Additionally, the market also mentioned concerns about overvaluation of stocks and increased volatility approaching the option expiration day on Friday. Regardless of the reasons, this intraday drop completely wiped out the optimism of the early trading session - the market had previously expected US stocks to rebound from the sell-off that followed the record highs reached at the end of October. Initially, positive signals seemed to come from the strong quarterly earnings report released by chipmaker NVIDIA Corporation (NVDA.US), which is at the center of the AI competition, and the quarterly update from Walmart Inc. (WMT.US) indicating that consumers were still spending. However, these were quickly overshadowed by a sudden and brutal sell-off. The S&P 500 index rose as much as 1.9% within the first hour of trading, but later gave back all gains and closed down 1.6%, wiping out over $2.7 trillion in market value. The VIX index, a measure of expected stock market volatility based on options, closed above 26 for the first time since April. The Nasdaq 100 index, dominated by tech giants, led the market lower, closing down 2.4%, expanding its drop from the record high reached on October 29 to 7.9%. Companies like Tesla, Inc. (TSLA.US), Alphabet Inc. Class C (GOOGL.US), Apple Inc. (AAPL.US), Microsoft Corporation (MSFT.US), Broadcom Inc. (AVGO.US) and Amazon.com, Inc. (AMZN.US) saw market value fluctuations exceeding $100 billion. The expected volatility index for the Nasdaq 100 index rose above 32 for the first time since April. The VXN index, known as the "tech VIX," surged before Friday's option expiration day, with the total nominal value of expiring options reaching approximately $3.1 trillion, including $1.7 trillion in S&P 500 index options and $725 billion in single stock options. NVIDIA Corporation's drag on the Nasdaq 100 index was particularly significant, with its stock price rising 2.4% in early trading before plummeting 3.2%, causing its market value to evaporate nearly $400 billion from its intraday high. Despite the company's revenue forecasts beating expectations, investors did not respond positively due to renewed concerns about the sustainability of AI chip spending in the market. Currently, the S&P 500 index has fallen over 5% from its high in October, and for the first time since February, it has dropped below its 100-day moving average, closing at a new low since September 11th. Thursday's sell-off was particularly pronounced in the riskiest areas of the stock market. An index highly exposing short stocks fell 3.5%, while Goldman Sachs Group, Inc.'s index of unprofitable tech companies fell 3.7%. The Russell Microcap index dropped 1.9%, expanding its drop from the previous high to 10%. Here are the views of Wall Street analysts, strategists, and traders on the sharp volatility in the stock market on Thursday: Chief Investment Officer of Northwestern Mutual Wealth Management Company Brent Schutte: "To gauge the performance of NVIDIA Corporation, it is necessary to consider it in the context of all the unresolved issues lately - from labor market strength, tariffs, inflation and the future actions of the Federal Reserve, to the sustainability of AI, stock valuation, concerns about private credit, unprofitable tech stocks and the pullback of cryptocurrencies. In short, there are many unresolved economic and stock market issues currently, and investors are fiercely debating." Director of Cross Asset Macro Strategy and Trading at Buffalo Bayou Commodities Frank Monkam: "As cryptocurrencies enter bear market territory, the deleveraging in cross-asset markets is not yet over. Retail participation in cryptocurrencies is high, and retail investors have been the driving force behind the market since spring - this vulnerability is now clearly evident." Global Stocks and Real Assets Director of Wells Fargo & Company Investment Institute Sameer Samana: "The performance of NVIDIA Corporation is positive, but not enough to dispel concerns about whether valuations are too high and whether recent trends in debt financing mean that investments are too aggressive without sufficient focus on shareholder returns." Chief Strategist of Interactive Brokers Group, Inc. Class A Steve Sosnick: "One thing I am currently watching is Bitcoin testing the $90,000 level again, as it has become an effective representation of overall investor risk appetite whether we agree with it or not." Co-Head of Derivatives Strategy at Susquehanna International Group Chris Murphy on the impact of Trend Following Funds (Commodity Trading Advisors): "With the dust settling on NVIDIA Corporation's earnings report and the probability of a December rate cut by the Federal Reserve extremely low, investors are starting to question the drive behind the end-of-year rebound. According to data, CTA fund positions are currently still in a fragile state; systematic strategies are still maintaining a mild net long position, and if the market continues to decline, it may trigger more selling." Director of Stock and Stock Derivatives Strategies at Citadel Securities Scott Rubner: "In the coming days, this mechanical outflow of funds may remain at a high level, then it will dissipate completely." Chief Investment Officer of PenderFund Capital Management Greg Taylor (regarding NVIDIA Corporation's earnings): "I think the early optimism was actually just short-covering. Now, the market is entering a phase of introspection." Chief Market Strategist at Miller Tabak + Co. LLC Matt Maley: "Can the profitability of AI reach the level at which the market is currently priced? This is the core issue. Traders are concerned about whether current AI investments can generate returns in five years. Therefore, many are choosing to 'play it safe'." Chief Market Technician at Piper Sandler Craig Johnson: "After the release of NVIDIA Corporation's earnings report, investors breathed a temporary sigh of relief. However, the market breadth needs more time to stabilize and start to recover."