Market Sell-Off Analysis: Citi Research on Earnings Expectations and Valuation Concerns

This analysis is based on the CNBC “Closing Bell Overtime” segment [2] featuring Tim Urbanowicz and Drew Pettit from Citi Research, published on November 13, 2025, which discussed the day’s significant market sell-off and earnings expectations.

The November 13, 2025 market sell-off represented a significant correction across all major indices, with the S&P 500 declining 1.66% to 6,737.49 and the Nasdaq Composite dropping 2.29% to 22,870.36 [0]. This marked the worst daily performance for major indices since October 10, 2025, indicating a broad market rotation rather than isolated sector weakness [0].

Citi Research’s Drew Pettit provided crucial context, stating that “a lot of good news was priced into markets coming into earnings” [0]. This observation captures the classic “sell the news” phenomenon that occurs when markets rally strongly in anticipation of positive events, leaving little room for upside surprises when those events actually materialize.

The sell-off was particularly severe in technology and growth sectors, with technology declining 1.57% and consumer cyclical stocks falling 2.87% [0]. Major technology companies including Nvidia, Broadcom, and Alphabet led the decline, reflecting growing concerns about AI-related stock valuations that had been building throughout October and early November [0].

: The market correction appears driven by a fundamental reassessment of growth stock valuations, particularly in the AI sector. The Nasdaq’s breach below its 50-day moving average (22,810.13) for the first time since April 30 signals potential further technical weakness [0].

: Monetary policy uncertainty intensified as rate cut expectations for December fell sharply to 51% probability, down from 62.9% the previous day [0]. This shift occurred as Fed officials expressed apprehension about additional easing, creating a headwind for equity markets.

: The performance divergence between defensive sectors (consumer defensive +0.87%) and growth sectors (consumer cyclical -2.87%) indicates a significant risk-off rotation [0]. This pattern suggests investors are increasingly prioritizing stability over growth potential in the current environment.

: Mixed earnings results from major companies like Disney (nearly 8% decline on mixed fiscal Q4 results) versus Cisco (7% jump on strong earnings) illustrate the selective nature of investor responses [0]. This variability supports Pettit’s thesis that expectations had become elevated across the board.

:

• Valuation Risk
  : The combination of elevated valuations and Fed uncertainty may significantly impact market volatility in the short term [0]. Stretched valuations in growth sectors warrant careful consideration.
• Technical Risk
  : The Nasdaq’s breach below key technical levels suggests potential for further downside if support levels fail to hold.
• Policy Uncertainty
  : Reduced expectations for Fed rate cuts indicate monetary policy could remain restrictive through year-end.

:

• Defensive Positioning
  : The outperformance of consumer defensive stocks (+0.87%) suggests opportunities in quality companies with stable cash flows [0].
• Selective Value
  : The broad-based decline may create entry points in fundamentally strong companies that were oversold during the market rotation.

The November 13, 2025 market sell-off reflected a convergence of factors including elevated earnings expectations, valuation concerns in technology stocks, and shifting Federal Reserve policy expectations. Citi Research’s analysis suggests markets had priced in excessive optimism ahead of earnings season, creating conditions for a correction when reality failed to meet heightened expectations [0].

The technical damage was significant, with the Nasdaq falling below its 50-day moving average for the first time since April 30, and all major indices experiencing their worst daily performance since October 10 [0]. The breadth of the decline across sectors indicates this was more than a simple tech sector rotation, suggesting a broader reassessment of risk appetite.

Market participants should monitor Fed communications, earnings momentum, and key technical support levels as indicators of potential market direction. The current environment appears to be transitioning from momentum-driven trading to fundamentals-focused investing, which could favor companies with strong balance sheets and sustainable competitive advantages.