After the economic data showed obvious weakness and the Fed made it clear that there was a high probability of starting an interest rate cut cycle in September, the market formed a new round of expectations for the Fed's interest rate cuts. Investors are pricing in a much higher probability that the Fed will cut interest rates by 50 basis points instead of 25 basis points in September.

On the one hand, if the Fed directly cuts interest rates by 50 basis points in September, it is undoubtedly announcing to the outside world that the Fed has misjudged the situation before, and can only make up for the negative impact of the previous slow action by cutting interest rates more sharply at one time. On the other hand, if the Fed continues to cut interest rates at the pace of 25 basis points as previously planned, it will not be able to curb the rapid economic downturn.

In addition, another major factor in the sharp pullback in US stocks came from external influences. The day before the Fed's monetary policy decision, the Bank of Japan announced a 25 basis point interest rate hike, and the yen rose against the dollar.

In addition, the U.S. stock market is in the earnings season, and some of the tech giants that have already reported earnings, such as Microsoft and Google, have not increased significantly in revenue and profit from the new generative AI-related businesses that investors had high hopes for, although the performance fundamentals remain solid. This reflects that the top companies are still in the "arms race" stage, and the real added value generated by generative AI has not yet been fully reflected in the financial results, which also makes investors begin to reposition the valuations of listed companies related to them.