The Nasdaq experienced a significant decline of 4.5% over the past week, prompting CNN's Fear & Greed Index to drop to 18, indicating "Extreme Fear" in the market. This downturn comes just one day before the 39th anniversary of Black Monday, leading to increased discussions about potential market crashes.

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On Saturday, while Wall Street was closed, traders suffered nearly $52 million in losses within a span of 10 minutes due to leveraged bets on artificial intelligence (AI) and semiconductor stocks.

The Fear & Greed Index assesses investor sentiment using seven market signals, each weighted equally. These include:

- Market momentum, determined by whether the S&P 500 is above or below its 125-day average.

- Stock price strength, gauged by the ratio of NYSE stocks hitting 52-week highs to those reaching 52-week lows.

- Stock price breadth, measured by trading volume for rising versus falling stocks, as indicated by the McClellan Volume Summation Index.

- The balance of put and call options, reflecting trader sentiment on potential price movements.

- Market volatility, represented by the VIX compared to its 50-day average.

- Safe-haven demand for stocks versus Treasury bonds.

- Junk bond demand, or the additional yield investors seek for holding riskier bonds.

The Philadelphia Semiconductor Index saw an 11.4% decline for the week, marking its worst performance since April 2025, according to Investing.com. In contrast, the Dow Jones Industrial Average posted a modest increase of 0.7%.

CoreWeave, which provides cloud computing power for AI, dropped approximately 25%, and its bonds reached new lows amid a rising debt burden in the AI sector. Simultaneously, recent inflation data has intensified speculation regarding a potential interest rate hike by the Federal Reserve, with Michael O'Rourke from Jones Trading commenting that the data suggests interest rates may remain elevated for a prolonged period.

Information technology companies constitute about 39% of the S&P 500 index, leaving index-fund holders particularly vulnerable to these market shifts.

On October 19, 1987, the Dow plunged 22.6% in a single day, as noted by the Federal Reserve; at that time, no trading brakes were in place. Currently, such brakes exist: a 7% or 13% drop in the S&P 500 triggers a 15-minute trading halt, while a 20% decline shuts down markets for the day. However, perpetual futures and crypto-exchange contracts are not subject to these same pauses, and forced sales during price drops can exacerbate declines. Approximately $38 million of Saturday’s losses were attributed to traders betting on rising prices.