Viewpoint: The U.S. stock market’s unheralded plunge was possibly triggered by leveraged ETFs and AI-related uncertainty.

U.S. equities opened higher then slid lower tonight. With no major breaking news, the Nasdaq 100 dropped 1,000 points in just 27 minutes, the S&P 500 erased $1 trillion in market capitalization, and quickly swung from +1% to -3% after the opening bell. Reviewing pre-market indicators, U.S. PCE inflation rose to 4.1%—its highest level since April 2023—paired with Apple’s announcement of up to 25% price hikes for Mac and iPad amid surging AI chip costs, which sent Apple’s stock plummeting nearly 6% and erasing $220 billion in market cap, sparking panic selling. Yet these developments alone do not appear to explain such a rapid, sharp market decline. The Kobeissi Letter attributes the heightened volatility to widespread leveraged ETFs, AI-related uncertainty, and massive liquidations in the crypto market, and forecasts that market volatility will persist.