U.S. Stock markets stare at major pull back as exerts sound warning after Wall Street investors question lofty tech valuations

U.S. stock markets are in for a volatile trading on Tuesday and apprehensions are raised over S&P 500, Nasdaq, Dow Jones' rally in the next few weeks. Wall Street indexes touched all-time highs last week and notched solid gains for October as quarterly reports from Big Tech companies signaled surging AI investments, which has been powering a bull run in U.S. equities this year. However, doubts over the circular nature of the spending and monetization of the technology have resurfaced, spurring investors to pull back after a breakneck rally in AI-related stocks. The CBOE Volatility Index, Wall Street's fear gauge, was near a two-week high, Reuters reported.

This comes as investors questioned lofty tech valuations after CEOs of top Wall Street banks Morgan Stanley and Goldman Sachs warned that equity markets could be heading toward a drawdown.

Shares of AI darling Palantir Technologies slid 7.3 per cent in premarket trading even as the data analytics company forecast fourth-quarter revenue above analysts' estimates. The stock has jumped nearly 400 per cent in the past year.


"It just feels like there's been so much talk that the market is overbought and there's a lot of overvalued stuff there that's concentrated in tech," said David Morrison, senior market analyst at Trade Nation.

Shares of big tech stocks slipped, with Nvidia down 2.2 per cent, Alphabet losing 1.8 per cent and Amazon.com off 1.6 per cent.

The rally will be under renewed scrutiny with semiconductor company Advanced Micro Devices reporting after the bell on Tuesday and Qualcomm later in the week.

Third-quarter earnings have been resilient so far, with more than 83 per cent companies of the S&P 500 companies that have reported as of Saturday, beating analyst expectations compared to a long-term average of 67.2 per cent, according to LSEG data.

U.S. Government Shutdown

With the U.S. government shutdown likely to become the longest ever, private data has found renewed importance for investors and the Fed alike, with eyes trained on Wednesday's ADP National Employment numbers.

Recent conflicting commentary from Fed officials has indicated differing perspectives on how to handle the data gap.

Chicago Fed President Austan Goolsbee said he was on the fence about cutting rates in December, with inflation still far above the central bank's target, while Governor Stephen Miran called the current monetary policy too restrictive.

Traders are now pricing in a 72 per cent chance of a 25-basis-point rate cut in December, lower than 90 per cent a week earlier, according to CME Group's FedWatch tool.

Local elections for New York's mayor and governors in New Jersey and Virginia will also be watched. Sarepta Therapeutics shares slumped 40.8 per cent before the bell after a trial for its muscle-wasting disease drug missed a key goal.

Spotify gained 3.4 per cent after it forecast fourth-quarter profit above Wall Street expectations, while U.S.-listed shares of Shopify and Uber slid 3.3 per cent and 5.2 per cent respectively after their third-quarter results.


FAQs

Q1. Which are top three indexes of U.S. Stock Market?
A1. Top three indexes of U.S. Stock Market are S&P 500, Dow Jones, and Nasdaq.

Q2. Which shares are down?
A2. Spotify gained 3.4 per cent after it forecast fourth-quarter profit above Wall Street expectations, while U.S.-listed shares of Shopify and Uber slid 3.3 per cent and 5.2 per cent respectively after their third-quarter results.