The ASX 200 is getting smashed. Is the bull market over?

The S&P/ASX 200 recorded its worst session of the year, excluding the selloffs from Trump's "Liberation Day" tariffs in April. There's no other way to put it – things are looking awfully bearish out there.

The ASX 200 finished Tuesday's session near intraday lows, down 1.94%. The only other occasions this year where the market fell this much were on 4 and 7 April, when Trump's tariff announcement drove losses of 2.44% and 4.23% respectively.

The selling pressure was relentless throughout the session. The market opened down just 0.77% in early trade before spending the entire day trending lower, falling to 1.34% by noon and breaching the 2.0% threshold by 3:13 pm AEDT.

S&P/ASX 200 intraday chart (Source: TradingView)

This marked a decisive break below the key 200-day moving average, a rather destabilising move that has killed momentum. As the old market adage goes, nothing good happens below the 200-day.

ASX 200 daily chart | Source: TradingView

Zooming out, the ASX 200 is now on track to record four straight weeks of declines and sits 7.3% below its 21 October record high.

What's driving the selloff

There's no single catalyst behind today's weakness. Global equity markets have been shaky for the past couple of weeks, with the S&P 500, Nasdaq and Dow all closing below their key 50-day moving averages last night. More broadly, several bearish drivers are at play:

• Market jitters ahead of Nvidia's quarterly earnings on Thursday

• Big momentum unwind, with continued weakness among AI, retail favourites, most shorted stocks and crypto

• AI scrutiny theme gathering pace: Softbank sold its entire Nvidia stake, Peter Thiel's hedge fund also dumped its full Nvidia position, CoreWeave cut guidance on data centre delays, financial press headlines about complex data centre financing options, widening tech credit spreads and growing OpenAI cash burn

• Hawkish Fedspeak has tilted the odds of a December rate cut to just 43%

• Delayed US September jobs report on Thursday will drive further rate volatility

The ASX 200 didn't suddenly wind up at a fresh five-month low overnight, it's been deteriorating for quite some time.

The market dipped 0.96% on Wednesday, 29 October, when core inflation accelerated well beyond market expectations last quarter. The RBA's closely watched trimmed mean annual inflation came in at 3.0% for the September quarter, up from 2.7% in the June quarter and marking its first increase since December 2022.

A stronger-than-expected jobs report on 13 November drove the market another 0.5% lower, effectively calling an end to the RBA's rate cutting cycle. Australia's unemployment rate fell back to 4.1% in October from 4.2% in the previous month, beating consensus expectations of 4.2%.

During this period, the Australian 10-year bond yield has surged almost 40 basis points to 4.44% since late October. While it's been relatively rangebound for the past two-and-a-half years, nothing good tends to happen when it begins pushing its upper ranges.

Australia 10-year bond yield (Source: TradingView)

Every sector lower

All eleven ASX 200 sectors finished lower on Tuesday, with Tech (-6.0%), Materials (-3.0%) and Financials (-1.9%) bearing the brunt of the selling, while Staples (-0.2%), Healthcare (-0.5%) and Utilities (-0.7%) outperformed on a relative basis.

The S&P/ASX 200 Tech Index has been gutted in recent weeks, down 26% since late September and just 7% away from trading below Liberation Day lows. What we're seeing now is the market aggressively selling richly valued tech names that were trading at lofty multiples back in early October: Xero (102x), Wisetech (95x), Technology One (96x) and Pro Medicus (276x).

Technology One reported a relatively solid FY25 result today, but the stock opened 6.5% lower and finished the session down 16%. On any other day, these numbers would have been relatively well-received:

• Revenue up 18% to $598.5m vs. $593.7m ests (0.8% beat)

• Total ARR up 18% to $554.6m vs. $568.3m ests (2% miss)

• EBITDA margin up 100 bps to 43.0% vs. 43.0% ests (in-line)

• Underlying NPAT up 17% to $137.6m vs. $139.8m ests (1.6% miss)

• Final dividend of 20 cps plus a 10 cps special dividend

The S&P/ASX 200 Financials Index is another sector that's been weighed down by the recent CBA and Macquarie selloff, both driven by their latest quarterly/half-yearly financial results. The index is now on a six-day skid, down 7.5% to its lowest level since May.

Other food for thought

Another under-the-radar data point is Japan's 10-year bond yield, which has quietly hit 1.74%, the highest since 2008, forcing the country to reverse three decades of exporting cheap money worldwide.

Japanese pension funds are now pulling an estimated $1.1 trillion out of US Treasuries because keeping money in America loses them money after hedging costs, turning the largest foreign buyer of American debt into a seller. This reversal threatens to push US interest rates higher.

The Bank of Japan meets on 18 December with a potential rate hike that could accelerate the unwinding of decades of global financial positioning built on free Japanese capital.

The bottom line

There's a long list of bearish drivers out there: big market players selling their AI stocks and flipping short, fading RBA and Fed rate cut expectations, key liquidity gauges in the US and UK tightening to levels not seen since the pandemic, and more.

But things are getting bearish at a time when 92% of S&P 500 companies have reported their latest quarterly earnings, with EPS growth currently sitting at 13.1% versus 7.9% consensus. Simply put, earnings have come out incredibly strong at a time when the Fed is expected to end its clampdown on liquidity (ending quantitative tightening from 1 December).

The S&P/ASX 200 looks increasingly oversold after this sharp leg down and appears due for a short-term bounce. However, we'll need to see where the dust settles and whether these bearish catalysts evolve into something more destabilising or prove to be a temporary setback.