Key Takeaways

• Wall Street stock volatility has reached billions of dollars in single-day swings.
• Large technology companies like Nvidia, Microsoft, and Apple are the primary drivers of this volatility.
• Increased use of derivatives and leveraged ETFs is exacerbating the fluctuations.
• Warnings of a potential "liquidity cascade" if stock correlations increase.

Daily stock price fluctuations on Wall Street reaching hundreds of billions of dollars have become commonplace. This phenomenon highlights the risks investors face, particularly as volatility increases in the large technology companies that have been driving the ongoing stock market rally.

Year-to-date, there have been 119 instances of individual stocks experiencing market capitalization changes exceeding $100 billion in a single day, marking a historical annual high. This increase in "hundred-billion-dollar" price swings is partially due to the sheer size of giants like Nvidia (NVDA), Microsoft (MSFT), and Apple (AAPL) – each boasting a market capitalization exceeding $3 trillion, making them major forces behind the dramatic market swings.

However, even considering the overall growth in stock market size, the magnitude of this year's volatility remains unusual. Bank of America analysis indicates that the number of "vulnerability events" for large-cap tech stocks in 2025 (i.e., stock price fluctuations far exceeding the normal range) has already surpassed the record set in 2024.

"It's possible for large-cap stocks to fluctuate 10%, 20%, or even 30% in a single day now," says Abhi Deb, head of global cross-asset quantitative investment strategy at Bank of America. "This range of volatility was extremely rare in the past."

The five largest tech companies – Meta Platform (META), Alphabet (GOOGL), Microsoft, Apple, and Amazon (AMZN) – with a combined market capitalization of $15 trillion, are scheduled to release their quarterly earnings this week. The high volatility of large-cap stocks makes this earnings season particularly risky. "If these companies' performances disappoint the market, the downside could be very steep," says Valérie Noël, trading manager at Syz Group.

Despite the dramatic fluctuations in individual stock prices, the S&P 500 index has set a series of record highs since the significant sell-offs in April, and overall market volatility has remained largely moderate – primarily because large-cap stocks do not typically move in the same direction simultaneously.

Deb points out that a change in this dynamic would be a "warning sign." "If there's a macroeconomic shock that causes individual stocks to move in perfect unison, the magnitude of the index's volatility would be much greater."

Goldman Sachs suggests that a major driver of stock price volatility is the derivatives market: retail investors and hedge funds are placing large bets on short-term movements of individual stocks during earnings season and economic events. This forces market makers to hedge by building their own positions, further exacerbating stock price swings.

Goldman Sachs data shows that trading volume for individual stock options this month reached its highest level since the "meme stock craze" of 2021, with retail investors accounting for 60% of these trades.

Leveraged exchange-traded funds (ETFs) for individual stocks – such as funds offering daily returns of 2 to 3 times that of a single stock – have also attracted significant inflows this year, further increasing market leverage. Earlier this month, Volatility Shares applied to launch 5x leveraged ETFs for stocks like Nvidia, Alphabet, and Tesla (TSLA).

Analysts say that leveraged products amplify price volatility: to maintain the fund's target leverage ratio, issuers must adjust positions daily – by increasing holdings when prices rise and decreasing them when prices fall.

"It is because of the rise of quantitative trading strategies, zero-day options, and 2x or 3x leveraged ETFs for individual stocks that these $100+ billion stock price swings have become so common," says Noël.

This year, the intense volatility beneath the market's surface has not translated into higher index volatility. Despite a temporary spike in Wall Street's "fear index" (VIX) earlier this month due to escalating trade tensions, US stock markets experienced the lowest quarter of volatility since 2018 in the three months leading up to September.

John Marshall, head of derivatives research at Goldman Sachs, says that current market themes like artificial intelligence, tax policy adjustments, and the global trade war are putting pressure on some stocks while driving others higher. UBS notes that this has led to an "extremely low" correlation between individual stocks this year, meaning that individual stock volatility has a limited impact on overall market volatility.

But analysts warn that if stock correlations rise, there could be simultaneous sell-offs in large-cap stocks, and in that case, extreme volatility in individual stocks could pose a greater risk to market stability.

Maxwell Grinacoff, head of US equity derivatives research at UBS, believes that the market faces a risk of a "liquidity cascade" – i.e., that traders who originally bet on continued stock price increases may be forced to sell their positions quickly.

JPMorgan Chase analysts estimate that on October 10 (the day Wall Street experienced its biggest single-day decline since April), leveraged ETFs were forced to sell $26 billion in stocks at the close to maintain fixed leverage requirements.

"I think the risk is that the market becomes too bubbly, too exuberant, and all assets start rising simultaneously," says Grinacoff. "Once an 'unknown unknown' disrupts everything, all assets may suddenly fall simultaneously."