US stocks experienced a noteworthy decline on Tuesday, driven by concerns over a potential AI bubble and ongoing worries surrounding the broader US economy. The market’s cautious stance is particularly evident as investors prepare for Nvidia’s upcoming earnings report and delayed jobs data.
The Dow Jones Industrial Average fell more than 1.1%, losing over 500 points, marking its worst three-day performance since April. The Nasdaq Composite, heavily influenced by technology stocks, retreated nearly 1.4%, while the S&P 500 dipped around 1%, facing its fourth consecutive day of losses.
In the cryptocurrency market, Bitcoin temporarily fell below $90,000 for the first time in seven months, contributing to a broader sell-off that erased the cryptocurrency’s gains for the year. This downturn in Bitcoin was particularly unsettling for Asian markets, as Japanese stocks recorded their most significant loss since April, further exacerbating investor anxiety and leading to a drop in 10-year Treasury yields.
The mounting worries about an AI bubble alongside economic concerns significantly influenced the market’s risk-averse sentiment. Investors are closely focusing on two key indicators that could illuminate the market’s trajectory in the upcoming days.
Nvidia’s third-quarter earnings report, set for release on Wednesday, is highly anticipated as it comes at a time when investors are reassessing the sustainability of the AI-driven market rally witnessed earlier this year. The company’s stock fell by as much as 3% on Tuesday, paralleling similar declines in other major tech firms like Amazon and Microsoft, both down around 3% as well.
Wall Street is also awaiting the September jobs report, scheduled for release on Thursday, which is expected to provide critical insights into the Federal Reserve’s future policy decisions. This report will be the first significant economic indicator since data releases were delayed due to the US shutdown. Given the shifting market dynamics in recent weeks, traders have adjusted their outlook on interest rate cuts and are now evaluating a nearly even split in opinions regarding potential easing.
Additionally, private sector job losses appear to be tapering off according to data from ADP, hinting at a gradual stabilization in employment. The upcoming earnings reports from major retailers like Walmart and Target are anticipated to shed light on consumer resilience ahead of the holiday shopping season. However, Home Depot’s announcement of a downward revision to its full-year profit guidance after missing earnings estimates led to a nearly 4% decrease in its stock price, adding to the uncertainty in the retail sector.
As the market navigates these challenges, investors remain vigilant, hoping for signs of a turnaround amidst ongoing fluctuations in stock prices and economic indicators.