ORLANDO, Florida, Nov 18 (Reuters) - The tech-induced

selloff across global stocks accelerated on Tuesday and soft

U.S. labor market indicators also weighed on Wall Street, while

fiscal worries in Japan helped drag Japanese stocks, bonds and

the yen lower.

More on that below. In my column today I look at what helped

trigger this swoon - a plain, old-fashioned shift in the U.S.

interest rate outlook. This suggests that although many economic

norms have been thrown out the window this year, some

fundamentals still matter for markets.

If you have more time to read, here are a few articles I

recommend to help you make sense of what happened in markets

today.

1. Bubble or breakout? Nvidia earnings put AI boom

under

the microscope

2. From OpenAI to Google, firms channel billions

into AI

infrastructure as demand booms

3. As data flow revives, Fed still faces a deep

policy

divide

4. Japan warns citizens in China about safety as

diplomatic

crisis deepens

5. Gilts lose their edge but not yet their

attraction: Mike

Dolan

Today's Key Market Moves

* STOCKS: Big three U.S. indices down 0.8-1.2%, but

the

Russell 2000 rises 0.6%. Japan, South Korea -3%, China -1%,

benchmark European indices down 1-2%. VIX highest close since

May 1.

* SHARES/SECTORS: Home Depot -6%, Amazon -4%, Warner

Bros

Discovery +4%. Tech -1.7%, consumer discretionaries -2.5%.

* FX: Dollar index flat, USD/JPY hits nine-month

peak

155.70, EUR/JPY record high above 180.00. Bitcoin falls below

$90,000 but ends up 1.5%.

* BONDS: U.S. yields down 3 bps at short end to bull

steepen the curve. Japanese yields spike - 20-year highest since

1999 at 2.775%, 40-year highest on record at 3.66%.

* COMMODITIES/METALS: Comex copper -0.7%, oil +1.5%,

gold

+1%.

Today's Talking Points

* AI leverage, private credit concerns deepen

Concerns over the huge sums needed for Big Tech and AI

capex, and worries about liquidity and transparency in private

credit, are growing in tandem. The result? Deepening unease

around leverage just as the Fed seems set to pause rate cuts.

Amazon is raising $15 billion in its first bond issue in

three years, Boaz Weinstein's Saba Capital Management has sold

credit derivatives to lenders seeking protection on names like

Oracle and Microsoft, and alternative asset manager Blue Owl -

involved with Meta in the financing of a huge Louisiana data

center - has moved to limit withdrawals from one of its funds.

* Technical breakdown?

For those who view technical analysis as an important part

of their investment or trading tool kit, these are interesting

times. Even those who dismiss it out of hand may have to respect

its potential impact on markets right now.

The selloff gathering pace has pushed many asset classes and

indices below key technical levels, signaling further downside

ahead - the Nasdaq closed below its 50-day moving average on

Monday for the first time since May, the Russell 2000 on Tuesday

closed below its 100-DMA for the first time since June, and

bitcoin on Friday closed below its 50-week moving average for

the first time since March 2023.

* A bad day for Japanese assets

Tuesday was a bleak day for Japanese markets. The Nikkei

225 stock index lost 3%, its biggest fall since April; the yen

slid to a nine-month low against the dollar and record low

against the euro; long-dated JGB yields spiked to their highest

on record.

The equity move is less concerning - benchmark indices are

only coming off record highs. But the fiscal fear-driven bond

and currency selloff is more eye-opening. At some point, they

will be cheap enough to lure domestic if not foreign investors.

If that doesn't materialize soon, Tokyo might have to step in

with official buying.

Wall Street wobble shows fundamentals still matter

Warnings about Wall Street's excessive optimism,

concentration risk, and frothy valuations have fallen on deaf

ears for most of this year, leaving market-watchers wondering

what, if anything, will cool the tech and artificial

intelligence frenzy.

It turns out that it could end up being a plain

old-fashioned shift in the interest rate outlook.

The S&P 500 and Nasdaq, buoyed by strong earnings and AI

capex investment, have notched dozens of record highs this year,

a remarkable feat given the uncertainty and poor visibility that

have characterized the economic and policy landscape in 2025.

But both indices peaked on October 29, the day the Federal

Reserve cut interest rates for a second consecutive meeting.

Crucially, however, Chair Jerome Powell said afterwards that a

third cut in December was not the "foregone conclusion" markets

had seemingly thought it would be. "Far from it," he emphasized.

In the three weeks since, the line of Fed officials

expressing their reluctance to ease policy again next month has

lengthened.

The resulting shift in market-based rate expectations has

been dramatic.

The probability of a December rate cut fell as low as 40% on

Monday, according to rates futures markets, compared with over

90% before the Fed's October 28-29 policy meeting. The next

quarter-point rate cut isn't fully priced in until March.

Many risk assets have responded in kind.

While the benchmark S&P 500 may only be down 3% since

October 29, a lot of tech and AI bellwethers have been hit

harder, with the Philadelphia Semiconductor Index's losses

approaching 10%. Bitcoin, a reasonable proxy for wider risk

appetite and speculative investment activity, is down 20%.

ALL EYES ON NVIDIA

There's often no obvious trigger for market corrections or

reversals, and they are typically long in the making.

For example, former Fed Chair Alan Greenspan's famous

"irrational exuberance" comment about the 1990s dotcom euphoria

was in December 1996, but the bubble didn't burst until March

2000.

There's no suggestion that a repeat of the dotcom bust is

unfolding now, but it does look like some air is coming out of

today's inflated markets. And the Fed's hawkish steer seems to

be a major catalyst, with many of the rate-sensitive AI and tech

names that powered the boom earlier in the year now leading this

mini swoon.

That's in line with long-held market thinking. When firms

are expected to generate strong cash flows in the future -

whether they be well-established megacaps or smaller startups -

a sudden swerve in the path for monetary policy can alter

perceptions of their current stock valuations quite

substantially.

Look no further than chipmaker Nvidia, which recently became

the world's first $5 trillion company - on October 29, no less -

but has since seen its share price fall 10%.

Some of Wall Street's largest hedge funds have recently

reduced exposure to this AI leader and other U.S. megacaps.

Japan's Softbank said last week it had sold all its Nvidia

shares for $5.8 billion, and tech billionaire Peter Thiel's

hedge fund also disposed of its entire Nvidia stake in the third

quarter.

The AI poster child releases its latest quarterly earnings

after the market close on Wednesday. With the Fed seemingly

about to put rate cuts on pause, the bar for another Nvidia

results-led market jump may be high.

That's a reminder that even though many accepted market and

economic rules have been thrown into doubt this year, the

standard playbook hasn't been ripped up completely.

What could move markets tomorrow?

* Japan machinery orders (September)

* Indonesia interest rate decision

* UK CPI and PPI inflation (October)

* Euro zone inflation (October, final)

* U.S. trade (August)

* U.S. Treasury auctions $16 billion of 20-year bonds

* U.S. earnings - Nvidia reports after market close

* U.S. Fed minutes from October 28-29 meeting

* U.S. Federal Reserve officials scheduled to speak include

Governor Stephen Miran, Richmond Fed's Thomas Barkin, New York

Fed's John Williams

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