NEW YORK: US stocks veered sharply lower on Tuesday as big banks warned that equity markets could be headed for a drawdown, reflecting mounting concerns over stretched valuations. All three major US stock indexes slid well into negative territory after the CEOs of Morgan Stanley and Goldman Sachs stoked fears of a potential market bubble, with the S&P 500 having climbed to a series of all-time highs, largely powered by the artificial intelligence boom. Tech shares weighed particularly heavily on the Nasdaq, with six of the “Magnificent Seven” AI-related momentum stocks losing ground on the day.
Results from Advanced Micro Devices and Super Micro Computer, expected after the bell on Tuesday, could offer insight regarding the momentum and staying power of the AI-driven bull run. The Philadelphia SE Semiconductor index dipped 2.8 per cent. JPMorgan Chase CEO Jamie Dimon warned last month of the heightened risk of a significant stock market correction within the next six months to two years, citing factors including geopolitical tensions.
“To say in the next 12 to 24 months that we might have a 10 per cent to 20 per cent correction is like, so what?” said Thomas Martin, senior portfolio manager at GLOBALT in Atlanta. “Markets have corrections all the time.”
“It’s a good thing for the market to have corrections, and it doesn’t mean that it won’t recover,” Martin added. “It’s not like it’s going to go down 10 per cent and stay down. You’ve got to have down days.”
The US government shutdown, the result of a congressional impasse, is nearing the record for the longest ever. The resulting dearth of official government data has led to increased scrutiny of private sources such as ADP’s National Employment index expected Wednesday. Comments from Federal Reserve officials are being parsed for clues as to how the data-dependent central bank will forge its monetary policy in the absence of crucial economic indicators.
Local elections for New York’s mayor and governors in New Jersey and Virginia will also be closely tracked. The Dow Jones Industrial Average fell 257.15 points, or 0.54 per cent, to 47,079.53, the S&P 500 lost 66.08 points, or 0.96 per cent, to 6,785.89 and the Nasdaq Composite dropped 376.37 points, or 1.58 per cent, to 23,458.35. Tech was down the most among the 11 major sectors comprising the S&P 500, falling 1.9 per cent. Consumer staples led the gainers. Palantir Technologies slid 7.9 per cent despite the data analytics company’s better-than-expected fourth-quarter revenue forecast. The stock has soared over 152 per cent in the past year. Uber fell 5.7 per cent in the wake of the ride-hailing platform’s quarterly profit miss, while Henry Schein advanced 9.1 per cent after hiking its annual profit forecast. Spotify and US-listed shares of Shopify dipped 3.3 per cent and 5.1 per cent, respectively, after their quarterly results.
Declining issues outnumbered advancers by a 2.63-to-1 ratio on the NYSE. There were 54 new highs and 154 new lows on the NYSE.
On the Nasdaq, 1,093 stocks rose and 3,522 fell as declining issues outnumbered advancers by a 3.22-to-1 ratio.
The S&P 500 posted 11 new 52-week highs and 18 new lows while the Nasdaq Composite recorded 42 new highs and 229 new lows.
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