CNN’s Fear & Greed Index sank to 18 on Friday, deep in “Extreme Fear,” after the Nasdaq fell 4.5% for the week. The reading lands one day before Black Monday turns 39, and crash calls are spreading online.
Traders lost nearly $52 million on leveraged AI and chip stock bets in 10 minutes on Saturday, with Wall Street shut.
Why Are AI Stocks Dragging Wall Street Into Extreme Fear?
The gauge scores investor mood from 0 to 100 using seven market signals, each measured against its own recent history, and all seven count equally. The seven are:
- Market momentum: whether the S&P 500 is trading above or below its average over the past 125 trading days.
- Stock price strength: how many New York Stock Exchange stocks are hitting 52-week highs compared with 52-week lows.
- Stock price breadth: how much trading volume is going into rising stocks compared with falling ones, measured by the McClellan Volume Summation Index.
- Put and call options: how many bets on falling prices (puts) traders are buying compared with bets on rising prices (calls), as a five-day average.
- Market volatility: the VIX, Wall Street’s “fear index,” compared with its 50-day average.
- Safe-haven demand: how stocks have performed against Treasury bonds over the past 20 trading days.
- Junk bond demand: the extra yield investors want for holding riskier company bonds instead of safer, investment-grade ones.
The Philadelphia Semiconductor Index fell 11.4% for the week, its worst run since April 2025, according to Investing.com. The Dow still rose 0.7%.
CoreWeave, a cloud firm renting out AI computing power, fell about 25%. Its bonds hit new lows amid a broader AI debt glut.
Hot inflation data also revived bets on a Federal Reserve rate hike, which would raise borrowing costs.
“Hot inflation data suggests interest rates will remain higher for longer,” Michael O’Rourke of Jones Trading stated.
Information technology makes up roughly 39% of the S&P 500, according to CME. Index-fund holders are heavily exposed.
Could Black Monday Happen Again Without Brakes?
On October 19, 1987, the Dow lost 22.6% in one day, per the Federal Reserve. No trading brakes existed then.
Today, a 7% or 13% S&P 500 drop pauses trading for 15 minutes. A 20% fall shuts markets for the day.
Those brakes skip perpetual futures, crypto-exchange contracts tracking stock prices around the clock. When prices fall, exchanges force-close borrowed bets, and each forced sale can push prices lower.
Roughly $38 million of Saturday’s losses hit traders betting on higher prices.
Is This a Crash or a Pullback?
Short sellers made about $32 billion on chip stocks in seven days, according to S3 Partners data cited by Bloomberg.
“The run up in chips was very aggressive so invariably there was going to be some consolidation or pull back,” Dec Mullarkey of SLC Management told Bloomberg.
Fundstrat’s Mark Newton has urged investors to buy the tech dip while diversifying.
Monday’s open will show whether weekend selling reflected real pressure or thin trading. The larger test is whether AI debt worries spread beyond a few heavily borrowed companies.
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