The Invesco QQQ Trust has fallen below its 50-day simple moving average, signaling potential further declines for tech stocks in September. This move aligns with historical trends of weakness in the technology sector during this month and broader market rebalancing away from concentrated tech leadership.

Technology Sector Faces Downward Pressure Amid September Trading

U.S. equities have entered September with notable downward pressure on the technology sector. The Invesco QQQ Trust (QQQ), an exchange-traded fund tracking the Nasdaq 100, recently fell below its 50-day simple moving average of 563 for the first time since February, indicating a shift in momentum for tech-heavy investments.

The Current Market Event

The decline in QQQ is a significant development, raising concerns among investors about a potential September selloff in technology stocks. While current market conditions do not suggest a catastrophic scenario, technical analysis indicates that QQQ could see further declines, potentially reaching a gap fill near 535. This level represents a retest of the cup-with-handle breakout observed on June 23.

This immediate downturn follows a sharp sell-off that began at the close of last week, extending into the first trading days of September. The S&P 500 has seen declines exceeding 1%, while the tech-heavy Nasdaq has fallen more than 1.5%, testing critical trend lines.

Analysis of Market Reaction and Underlying Factors

The market's shift is attributed to a confluence of factors, including seasonal trends, evolving interest rate expectations, and a broader rebalancing of capital. Historically, September has proven to be a challenging month for equities; the S&P 500 has declined in September in each of the past four years and in seven of the past 10. Over the past 15 years, the Nasdaq's average September monthly return has been -1.4%, contrasting with its overall average monthly return of approximately +1.4%.

NVIDIA Corp. (NVDA), a leading AI chipmaker, has been a significant contributor to the recent sell-off, with its shares falling 11% during the first two trading days of September, resulting in a market capitalization decline of USD 327 billion. The FANG+ index, which tracks the performance of the top 10 most-traded U.S. tech stocks, has also experienced a decline of 3.2%.

Market sentiment had shown signs of complacency leading into this period. Gareth Soloway, Chief Market Strategist at Verified Investing, highlighted this complacency:

"When you see the VIX getting down towards 14, which shows complacency..."

Soloway further noted the return of market volatility:

"Volatility is back and that is what us as swing traders and day traders crave. It means we can make a lot of money."

Rising interest rates and geopolitical tensions impacting supply chains are also contributing to the current market environment. The U.S. 10-Year Treasury Notes Yield (US10Y.BD) traded at 4.284% on Tuesday afternoon, with its recent downtrend suggesting a potential test of 3.75% in early 2026. This would have significant implications across various market segments, including mortgages and small-cap equities.

Broader Context and Implications: A Healthy Reset and Rebalancing

Analysts view the current selloff in tech stocks, which has seen the Nasdaq Composite drop over 5% in a single week and Amazon.com Inc. shed 8%, as a "healthy reset." This correction allows for more grounded valuations to emerge, particularly given concerns over inflated valuations stemming from the AI-driven rally in 2024. The Nasdaq's price-to-earnings ratio, hovering near 30, had begun to echo warning signs seen during the dot-com era.

This market dynamic aligns with a broader "great rebalancing" of capital, shifting from a concentrated, technology-led market rally to broader market leadership. While the Nasdaq Composite has fallen over 6% year-to-date in 2025, the S&P 500 energy sector has remained positive, gaining 3.92% through mid-June 2025. This rebalancing is driven by perceived overvaluation in tech, evolving interest rate expectations, a maturing economic cycle, and persistent inflation concerns, signaling a move towards a broadening economic expansion beyond solely tech-driven growth.

Looking Ahead

The immediate future for the technology sector suggests continued volatility. However, this period may present opportune moments for investors to strategically re-evaluate their portfolios, focusing on quality large-cap tech companies showing evidence of AI returns, particularly in areas like AI logic chips. Semiconductor capital spending remains promising, and strong order books combined with anticipated increases in megacap AI capital expenditures are expected to provide support in the coming quarters.

In contrast to the tech sector's current headwinds, the Dow Jones Industrial Average is demonstrating resilience, holding above an inverse head-and-shoulders pivot at 45,000. It could potentially eye a run toward 52,000 in the first half of 2026. Recent changes to the DJIA, including the addition of NVIDIA Corp. and The Sherwin-Williams Co., reflect an ongoing effort to ensure the index offers a more representative exposure to evolving market sectors.