Closing Recap 

A wave of risk aversion swept through global markets on Tuesday, with nearly every asset class trading lower amid widespread profit-taking. U.S. stocks saw their worst day in weeks, triggered by cautious comments on equity valuations from the CEOs of Goldman Sachs and Morgan Stanley. The tech-heavy Nasdaq led the declines with a sharp 2.04% drop, as the high-flying AI names that have driven the recent rally bore the brunt of the selling.

This “risk-off” mood sent investors piling into the safety of government bonds, pushing Treasury yields lower. The U.S. dollar was a key beneficiary of the flight to safety, extending its gains and pushing the euro to a three-month low. The sell-off was even more brutal in the cryptocurrency space, where a staggering $250 billion was wiped from the total market cap, sending Bitcoin crashing below the key $100,000 psychological level for the first time since May. 

Key Takeaways 

• Valuation Fears Trigger Broad Market Sell-Off: A “risk-off” mood has swept through global markets, with U.S. stocks tumbling as valuation concerns, sparked by cautious comments from major bank CEOs, finally take hold.
• Big Bank CEOs Spook Markets: Cautious commentary from the CEOs of Goldman Sachs and Morgan Stanley, flagging the risk of a 10-20% market drawdown, triggered the sell-off. 
• Safe-Haven Dollar and Yen Surge: The flight to safety is in full effect, with the U.S. Dollar extending its gains to three-month highs and the Japanese Yen rallying strongly across the board as investors dump risk assets.
• Crypto Market Collapses: Bitcoin officially entered a bear market, down 20% from its October high. Prices plunged below $100k amid a $1.3 billion liquidation cascade, wiping out over $1 trillion in market cap since early October. 
• Dollar and Treasuries Benefit from Safe-Haven Flows: The U.S. Dollar Index extended gains as investors sought safety, pushing EUR/USD to a 5th straight daily loss. Treasury prices rose as yields fell. 
• Pound Hits 6-Month Low Ahead of BoE: The British Pound is in a clear downtrend, tumbling to its lowest level since April as traders jump ship ahead of tomorrow’s Bank of England rate decision.
• Longest Shutdown in History: The U.S. government shutdown is now on Day 35, officially tying the record for the longest in history, with no end in sight and growing economic consequences. 
• Gold Dips but Finds Support: Gold fell 1.33% to settle at $3,960 but rebounded in Asian trading as the market jitters revived its safe-haven appeal. 
• ADP and ISM Services on Tap: Markets are bracing for today’s key U.S. data, with the ADP employment report and ISM Services PMI taking on extra importance due to the ongoing shutdown. 

Market Overview

The market’s fearless rally has finally hit a wall of fear. A wave of intense selling swept through global markets on Tuesday. After weeks of relentless buying, gravity finally reasserted itself on Tuesday. The catalyst was a dose of realism from Wall Street’s top brass. Comments from Goldman Sachs CEO David Solomon and Morgan Stanley CEO Ted Pick regarding stretched equity valuations and the potential for a significant market drawdown gave investors a clear reason to lock in profits. The subsequent selling was broad and indiscriminate, a classic “risk-off” day where correlations converge and cash is king. 

Both leaders warned of a potential 10-20% market drawdown, pointing to “expensive” valuations and “bubble-like” dynamics in the tech-led rally. This dose of reality from Wall Street’s top brass was enough to shatter the market’s recent complacency.

Index	Up/Down	%	Last
DJ Industrials	-251.69	-0.0053	47084
S&P 500	-80.21	-0.0117	6771
Nasdaq	-486.09	-0.0204	23348
Russell 2000	-43.89	-0.0178	2427

The tech sector, which has been the market’s undisputed leader, was hit the hardest. The very names that have soared on AI optimism saw the biggest declines, a sign of froth coming out of the most crowded trades. This market-wide deleveraging was most evident in the crypto space, which experienced a catastrophic collapse. Bitcoin’s plunge below the critical $100,000 threshold triggered a massive wave of forced liquidations, officially tipping the asset into a bear market. The macro backdrop remains challenging, with the U.S. government shutdown now officially the longest on record, threatening to inflict serious economic damage and further complicating the Federal Reserve’s policy decisions.

Economic Calendar 

With the U.S. government shutdown now officially the longest in history, the market is operating in an information vacuum. Today’s private-sector data will be scrutinized even more closely than usual for clues on the health of the U.S. economy. 

Data Released Earlier / Overnight: 

• New Zealand Q3 Labor Data: The jobless rate rose to 5.3%, employment was flat, and wage growth was soft, confirming a further softening in the labor market and weighing on the NZD. 
• BoJ September Meeting Minutes: Reinforced the Bank’s cautious stance on policy normalization, with members citing uncertainty over U.S. tariffs and global trade, despite agreeing that real interest rates remain very low.
• German Industrial Orders (Sep): Rose +1.1% m/m, beating the +1.0% forecast, helped by a boost in the automotive sector. 
• China Caixin Services PMI (Oct): Slipped to 52.6, a three-month low, as a drop in overseas orders offset stronger domestic demand. 

Today’s Economic Calendar: 

• European Session: A light calendar with only low-tier data like French Industrial Production and Italian Retail Sales. 
• U.S. Session: The focus will be on two key releases: 
• ADP Employment Report (Oct): Expected to show a gain of 28K jobs. This will be the market’s primary read on the labor market this month. 
• ISM Services PMI (Oct): Forecast to tick up to 50.8 from 50.0. The prices paid component will be closely watched for inflation signals. 
• U.S. Supreme Court Tariff Hearing.

Asset Class Spotlight: FX, Commodities, Bonds & Crypto

The risk-off mood has hammered commodities and crypto so it was a rough session for commodities. Gold fell sharply during the U.S. session, with December futures settling down 1.33% at $3,960.50 an ounce. However, the metal found strong buying interest in Asia as the market jitters revived its safe-haven status, pushing prices back above the $4,000 psychological level. Oil prices also fell amid the risk-off mood, with WTI crude dropping nearly a dollar to settle at $60.56 per barrel. 

Asset	Up/Down	Unit / % Change	Last
WTI Crude	-0.49	-0.0081	60.56
Gold	-53.5	-0.0133	3960.5
EUR/USD	-0.0037	-0.0032	1.1481
USD/JPY	-0.62	-0.004	153.59
Bitcoin	-5500	-0.052	101500
10-Year Note Yield	-0.022	-0.0053	0.04085

Currencies The flight to safety was the dominant theme in the forex market, with the U.S. dollar extending its gains against most of its peers. 

• EUR/USD: The pair fell for a fifth consecutive session, breaking below the key 1.1500 level to its lowest point since August. Risk aversion and ongoing Fed hawkishness are creating a powerful downdraft for the single currency. 
• GBP/USD: The pound plunged towards the major 1.3000 psychological level, reaching levels not seen since April. Bearish pressure is mounting as traders dump the currency ahead of Thursday’s Bank of England meeting, where the MPC is expected to maintain a cautious, on-hold stance. 
• USD/JPY: The pair saw some retracement from its recent highs, dipping towards 153.50. The yen attracted some safe-haven demand amidst the equity market rout, but its gains are likely to be capped by the Bank of Japan’s persistently dovish policy stance. 

The crypto market experienced a full-blown crash. Bitcoin plunged below the $100,000 mark for the first time since May, officially entering bear market territory. Ethereum was hit even harder, falling over 11%. The collapse was driven by a massive $1.3 billion wave of liquidations as leveraged traders were wiped out, erasing over $1 trillion in market capitalization since the peak in early October. U.S. government bonds were one of the few assets in the green. Prices edged higher as yields fell, with the benchmark 10-year yield dropping 2.2 basis points to 4.085%. The move reflects a classic flight-to-safety trade as worries over equity valuations and the broader economic outlook sent investors seeking the security of government debt. 

Looking Ahead 

After a day of significant volatility, the market will be looking for stability. Today’s U.S. ADP employment report and ISM Services PMI will be crucial in shaping the near-term outlook. Stronger-than-expected data could ease recession fears but might also reinforce the Fed’s hawkish stance, creating a tricky environment for risk assets. Conversely, weak data could heighten growth concerns but might also revive hopes for a December rate cut, potentially weighing on the dollar. Traders should be prepared for another session of heightened volatility as the market navigates these competing narratives. 

What to watch: 

• The Valuation Reset: The “bubble talk” from top bank CEOs has clearly resonated with the market. The key question now is whether this is a short, sharp correction or the beginning of a more sustained downturn. The price action in the tech sector will be the primary tell. 
• The Bitcoin Bloodbath: The crash below $100,000 and the massive liquidations are a major technical and psychological blow to the crypto market. The market has now officially erased over $1 trillion in value since October 6th. Watch to see if dip-buyers emerge or if the fear of further losses keeps sentiment suppressed. 
• ADP and ISM as the Only Guides: In the absence of official jobs data, today’s ADP and ISM Services PMI reports are now the most important economic releases of the month. The market will be hyper-sensitive to the employment components of these reports for any clues on the health of the labor market. 
• The Flight to Safety: The strong bid for the U.S. Dollar, Japanese Yen, and U.S. Treasuries is the dominant theme. This trend is likely to persist as long as the current “risk-off” mood prevails.