Last week's 'me too' ASX sell-off, following Wall Street's decline, is expected to persist today, with the futures market projecting a 65-point drop as trading resumes this morning.
The ASX 200 fell by 96 points, equivalent to 1.4%, to 6,981.6 on Friday, with all industry sectors trading in the red.
As a result, the index ended the week down 2.2% and down 0.66% for the year to date, with a 7.4% drop since its latest peak on July 27.
Analysts attribute this decline, in part, to renewed speculation about higher interest rates at the upcoming Reserve Bank board meeting on November 7, which has dampened investor sentiment.
In the U.S., concerns persist about a possible surprise rate rise at the upcoming Fed meeting, as the yield on the key 10-year Treasury bond briefly exceeded 5% last week, although it eased on Friday.
However, some economists are questioning whether the recent surge in yield, which saw a 30-point increase last week and nearly half a percent in the past month, will prompt the Fed to leave rates unchanged next week.
Currently, the Federal Funds Rate stands at 5.25% to 5.50%, with home mortgage rates reaching around 8% for a 30-year fixed rate, a level not seen in 23 years.
Last week's rate surge, along with geopolitical tensions in the Middle East that raised oil prices and concerns about inflation and interest rates, negatively impacted confidence across all markets.
The S&P 500 dropped 1.26% to 4,224.16 on Friday, marking its first losing week in three, while the Nasdaq lost 1.53% to 12,983.81, and the Dow lost 286.89 points, equivalent to 0.86%, closing at 33,127.28.
For the week, the S&P 500 lost 2.4%, the Dow slipped 1.6%, and the Nasdaq shed 3.2%, experiencing its second consecutive week of losses. Notably, some major tech companies, including Amazon, Intel, Alphabet, and Microsoft, are set to report in the upcoming week.
Investor nervousness is on the rise, with Wall Street's most closely-watched measure hitting its highest level in nearly seven months. While the benchmark stock index is down 8% from its July 31 high for the year, it remains up 10% year-to-date (down from just over 16% at the end of June).
The yield on the benchmark 10-year Treasury bond surpassed 5% for the first time in 16 years but retreated to 4.92% by the end of the week, still up 30 points for the week.
In the U.S., 30-year house mortgage rates reached 8%, the highest since 2000, impacting the strength of the housing market.
Shares of Amex dropped by 5% on Friday following a weak quarterly report, while regional banks, such as Regions Financials Bankshares, fell by 12% after their own weak quarterly results.
Nvidia, a stock associated with the AI chip boom, fell by 8% over the week, and Tesla shares experienced a decline of more than 15%.
Defensive sectors of the index have suffered this year, with utilities down about 18%, consumer staples down nearly 9%, and healthcare down roughly 6%, partly due to higher Treasury yields diminishing their appeal.
Analysts at UBS Global Wealth Management noted that "safe-haven assets have not performed as expected in response to conflicting growth data and elevated geopolitical tensions."
Some investors are turning to short-term Treasuries or money-market funds, which offer more attractive returns as interest rates have been rising since early last year.
US money market funds have seen $640 billion in inflows this year, according to LSEG data. Additionally, hundreds of billions of dollars have flowed into bond funds, despite losses in the market.
