NEW YORK: Wall Street’s main indexes hit one-month lows on Tuesday on concerns over lofty equity valuations and dimming prospects of a December interest rate cut, while investors awaited Nvidia’s earnings and key government data due later this week.
Most heavyweight tech stocks were under pressure, with Amazon.com down 3.1percent. Chip stocks also had a selloff, with the Philadelphia SE Semiconductor Index down 1.7percent.
At 11:38 a.m. ET, the Dow Jones Industrial Average fell 367.39 points, or 0.79 percent, to 46,222.85, the S&P 500 lost 34.64 points, or 0.52 percent, to 6,637.77 and the Nasdaq Composite lost 187.09 points, or 0.82 percent, to 22,520.99.
Nvidia’s quarterly results, due after markets close on Wednesday, are seen as a litmus test for the AI-driven rally that has pushed markets to record highs this year. The AI chip giant’s shares were down 2percent, extending Monday’s near 2percent drop. Alphabet CEO Sundar Pichai told the BBC in an interview on Tuesday that no company would be unscathed if the AI boom collapses.
Eight of the 11 S&P sub-sectors were in the red, with information technology and consumer discretionary the worst hit. “We’re definitely seeing more jitters as we move into a late-cycle stage. Concerns are mounting around how capex is financed and, importantly, what the return on investment will look like,” said Johanna Kyrklund, group chief investment officer at Schroders. “The weakness we’re seeing in stocks is really just a very limited selloff… valuations are expensive, but they can probably stay expensive for a while longer.” On the earnings front, Home Depot lost 3.4percent after the home improvement chain forecast a bigger drop in full-year profit. Rival Lowe’s also dipped 1.3percent.
Big-box retailers Walmart and Target are also set to report this week, with their results expected to provide insights into the health of the American consumer.
Concerns over high valuations and dwindling expectations of a December rate cut have led to a pullback in US stocks, with the S&P 500 down about 4percent from its October peak.
The S&P 500 and the Nasdaq both closed below their 50-day moving averages on Monday, an important technical threshold, for the first time since late April. The Dow closed below that level for the first time since October 10. The CBOE Volatility Index, dubbed Wall Street’s fear gauge, hit a one-month high on Tuesday.
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