The S&P 500 closed sharply lower Tuesday after major Wall Street CEOs warned of a possible pullback ahead amid concerns about tech valuations and uncertainty on further Federal Reserve rate cuts.
At 4:00 p.m. ET (20:00 GMT), the Dow Jones Industrial Average slipped 251 points, or 0.5%, the S&P 500 index dropped 1.2%, and the NASDAQ Composite fell 2%.
Goldman Sachs, Morgan Stanley sees possible correction ahead Goldman Sachs and Morgan Stanley said they expect a material corrections in stock markets amid concerns that valuation have stretched too far.
"We should welcome the possibility that there would be drawdowns, 10% to 15%, that are not driven by some sort of macro cliff effect," Morgan Stanley CEO Ted Pick said on Tuesday. The remarks were echoed by Goldman CEO David Solomon warning that "technology multiples are full." Still, come believe that the sell off is likely a delayed reaction to cooling expectations on a December Fed rate cut. "While high valuations are probably working to impede further gains in the stock indexes, we think that this sell-off comes as a delayed reaction to the Fed’s avowed unwillingness to reduce its policy rate December.," Macquarie said in a recent note. And while Fed Chair Jerome Powell suggested that last week’s interest rate cut by the U.S. central bank might be the last of the year, both his colleagues Mary Daly and Governor Lisa Cook indicated that an easing at the December Fed meeting was still a possibility.
3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or remove ads. On the economic front, meanwhile, the latest ISM manufacturing index showed factory activity in the U.S. contracted for an eighth straight month in October, with a reading of 48.7, below the 50-point mark that separates growth from contraction. The ongoing government shutdown, which is flirting with becoming the longest such closure in American history, has left investors and Fed policymakers without a range of critical data points needed to establish the state of the U.S. economy.
Palantir falls despite record quarter
The dominant tech sector has remained in focus, with Palantir Technologies (NASDAQ:PLTR) stock falling despite the data analytics titan posting another quarter of record revenue.
Palantir, whose operations also involve software for the defense sector, reported net profit of $475.6 million on $1.18 billion in third-quarter sales, both topping estimates.
Writing in a letter with the release, Chief Executive Alex Karp said the business is "now producing more profit in a single quarter than it did in revenue not long ago."
The company also forecast better-than-anticipated current-quarter sales, fueled by a boom in AI adoption which has lifted demand for its data analysis services.
Elsewhere, Advanced Micro Devices (NASDAQ:AMD) is set to report after the closing bell, becoming the latest AI chipmaker to release quarterly results following an intense round of dealmaking in the sector.
Last month, AMD also said it would supply AI chips to OpenAI as part of a multi-year deal that would both generate billions of dollars in annual revenue and grant the AI startup access to about a 10% stake in the firm.
