U.S. 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 U.S. stock indexes slid well into negative territory after the CEOs of Morgan Stanley MS.N and Goldman Sachs GS.N 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 .SPLRCT 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 AMD.O and Super Micro Computer SMCI.O, 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 .SOX dipped 2.8%.
JPMorgan Chase JPM.N 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% to 20% 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% and stay down. You’ve got to have down days."
The U.S. 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 .DJI fell 257.15 points, or 0.54%, to 47,079.53, the S&P 500 .SPX lost 66.08 points, or 0.96%, to 6,785.89 and the Nasdaq Composite <.IXIC> dropped 376.37 points, or 1.58%, to 23,458.35.
Tech was down the most among the 11 major sectors comprising the S&P 500, falling 1.9%. Consumer staples .SPLRCS led the gainers.
Palantir Technologies PLTR.O slid 7.9% despite the data analytics company's better-than-expected fourth-quarter revenue forecast. The stock has soared over 152% in the past year.
Uber UBER.N fell 5.7% in the wake of the ride-hailing platform's quarterly profit miss, while Henry Schein HSIC.O advanced 9.1% after hiking its annual profit forecast.
Spotify SPOT.N and U.S.-listed shares of Shopify SHOP.O dipped 3.3% and 5.1%, respectively, after their quarterly results.
Reuters
