Wall Street indices continued their decline amid a two-week selling spree in technology stocks, stirring investors to pivot towards European and Chinese markets where fundamental indicators are expected to improve.

The American economy is currently facing challenges, while growth in China has been boosted by optimism surrounding technologies such as artificial intelligence, leading to increased market confidence that Chinese stocks, particularly in the technology sector, may outperform American ones in the coming years.

The Dow Jones Industrial Average dropped by 260.32 points, or 0.62%, closing at 41,581.31 points.

The S&P 500 fell 1.07%, finishing at 5,614.66 points, and is currently 8.6% below its highest closing in February, nearing correction territory.

The Nasdaq Composite index decreased by 1.71%, ending trading at 17,504.12 points.

Tesla, one of the most severely affected stocks in the market correction, saw a decline of more than 5% on Tuesday after RBC Capital Markets lowered its price target, citing increasing competition in the electric vehicle sector.

The company's stock has lost over 36% of its value in the past month.

Tesla was not the only technology giant under pressure; shares of Palantir and Nvidia fell by nearly 4% and over 3%, respectively.

The Select Sector SPDR (XLK) technology ETF also weakened by over 1%.

Ris Williams, Chief Investment Officer at Wave Capital, noted that the market seems to be rotating capital into previously weaker sectors and exiting those that have performed well in recent years.

He added that the market will remain unstable until the decision-making on tariffs occurs on April 2, referencing President Donald Trump's decision to exempt certain import tariffs on goods from Canada and Mexico.

These losses follow two consecutive days of growth on Wall Street, which came after several challenging weeks when weak economic data and Trump’s unpredictable tariff policies shook investor confidence in America's financial health.

The S&P 500 officially entered correction territory last week but saw some recovery on Friday and Monday.

Despite this rebound, the technology-focused Nasdaq remains in correction, a term designating a drop of at least 10% from its recent peak.

All three major indices remain in the red for the year, underscoring the strength of the current market retreat.

As investors continue to monitor news from the White House, attention has shifted to the two-day Federal Reserve meeting that began on Tuesday.

It is anticipated that the central bank will maintain interest rates at their current level.

Investors are advised to capitalize on selling opportunities during market upswings in the U.S. and to buy shares during corrections in Europe and China, where there are significant signs of improving fundamental indicators, according to experts.

However, analysts from Bank of America caution that rapid growth in the Chinese market could signal an impending correction.

Analysts at the bank have identified "fundamental similarities" between the current market cycle and that of a decade ago when Chinese authorities implemented stimulus measures, reforms, economic rebalancing, and technological breakthroughs.

James Sullivan, Director of Asian Pacific Capital Markets Research at JPMorgan, highlights that Chinese stocks remain exceptionally attractive compared to global markets, given that investor positioning in this market is still at very low levels.

Currently, the MSCI China Index is trading at a multiple of 13.38 against projected earnings for the next year, according to FactSet data.

In comparison, the S&P 500 is trading at a significantly higher multiple of 20.72.

There are predictions that Chinese stocks will outperform American ones over the next four years, attributed to initial valuations.

China has long been viewed as "dead money" for investors, yet has simultaneously become a source of uncertainty for financial advisors who have been reluctant to recommend investments in Chinese funds.

Chinese equities have gained traction since the beginning of the year, leading investors to forecast that A-shares on the mainland will outperform those in the U.S., suggesting that appealing valuations outweigh the notion of American exceptionalism.

Last week, the S&P 500 entered correction territory for the first time in 2023. In contrast, the MSCI China Index rose 19% from the start of the year to March 9, marking its best start to a year on record.

This contrast hints at a sharp reversal from just a few months ago when many investors believed the U.S. was uniquely positioned to withstand the economic and political turbulence affecting the rest of the world.

At that time, Chinese stocks had stagnated due to regulatory uncertainties and concerns about the health of the Chinese economy.

Amid these dynamics, the tariff policies under President Trump have led to speculation about potential economic slowdowns in the world's largest economy.

Meanwhile, optimism regarding artificial intelligence in China has increased, particularly following the introduction of the DeepSeek R1 model earlier this year.

Market capitalizations of American stocks, in relation to global market capitalization, reached an all-time high at the end of last year, coinciding with the narrative of "American exceptionalism." Analysts suggest that the era of American exceptionalism could have concluded at the beginning of this year, with anticipated fiscal tightening and Trump’s trade war potentially slowing U.S. economic growth to below 2% by 2025.

The U.S. GDP grew 2.8% in 2024 compared to 2023. The situation concerning U.S. debt and deficits became increasingly serious in the first month of Trump's presidency, as he prioritized addressing fiscal issues.

Concerns about stagflation pose a significant risk to the U.S. economy as the trade war could simultaneously slow economic activity and stimulate inflation, indicating that the decline in U.S. stocks may not be over.

Analysts foresee continued sell-offs in U.S. equities, especially with uncertainties surrounding trade policies expected to persist until at least April 2.

Stock positioning may reach the lower end of the range, reminiscent of the last trade war, potentially driving the S&P 500 down to 5,250 points, indicating a drop greater than 7% from the earlier weekly closing at 5,675.12 points.

In contrast, Chinese technology stocks are experiencing robust growth following advancements from DeepSeek, amidst clear indications of governmental support for the tech sector and plans for increased funding.

The Hang Seng Tech Index, tracking major Chinese tech companies listed in Hong Kong, has risen over 30% since the start of the year, according to data.