Dow Stumbles and Tech Stocks Slide as Volatility Picks up on Wall Street

Summary:

Stocks have climbed higher on strong corporate earnings and enthusiasm about AI. Yet concerns also linger that the market’s gains are increasingly reliant on tech companies.

US stocks fell Thursday as concerns mounted about expensive tech stocks and a risk-off sentiment spread through markets after new data showed a bleak outlook for the job market.

The Dow was down 403 points, or 0.85%. The broader S&P 500 fell 0.9%. The tech-heavy Nasdaq Composite slid 1.44%.

A wide range of tech and AI stocks fell, continuing a recent patch of volatility amid concerns about expensive valuations and nerves about a bubble.

Chipmaker Advanced Micro Devices (AMD) slid 6.3%. Palantir (PLTR) fell 5.5%. Nvidia (NVDA) fell 3%.

Wall Street’s fear gauge, the VIX, jumped 11%. CNN’s Fear and Greed index hovered in “extreme fear.”

Legendary investor Warren Buffett’s favorite market indicator, which compares a measure of the total value of the US stock market to the value of US economic growth, is also flashing a warning sign. The Buffett Indicator is at a record high above 200%, signaling the stock market might be strongly overvalued.

“The S&P 500 today is at historically extreme valuations,” Torsten Slok, chief economist at Apollo Global Management, said in a note.

Meanwhile, investors rushed in to government bonds, pushing yields lower, after data showed an acceleration in layoff announcements last month. The number of announced jobs cuts in October was the highest increase for that month since 2003, according to data from Challenger, Gray & Christmas.

US Treasury bonds are considered safe bets when there are signs of a slowdown in the economy. A weakening labor market can also bolster arguments for the Federal Reserve to cut interest rates. Investors tend to buy Treasuries when the Fed is expected to cut rates in order to lock in current yields.

“With yields still attractive and likely to fall, we continue to believe that quality fixed income offers an appealing combination of income and the potential to perform well in the event of slowing economic activity and further rate cuts,” Ulrike Hoffmann-Burchardi, global head of equities at UBS Global Wealth Management, said in a note.

Wall Street this week was also attuned to the Supreme Court’s deliberations and oral arguments about the legality of President Donald Trump’s sweeping global tariff regime that relies on an emergency powers law.

Investors in recent months have looked past concerns about tariffs, while the revenue collected has helped assuage bond investors’ nerves about enormous US deficits. While a decision on the tariffs is not immediately expected, it could prove to be a thorny issue for investors if the tariffs are struck down — despite the headache they caused earlier this year.

Stocks had been coming off a monthslong hot streak. The Dow rose every month from April through October, posting its best monthly winning streak since the end of 2017.

Stocks have climbed higher on strong corporate earnings and enthusiasm about AI. Yet concerns also linger that the market’s gains are increasingly reliant on tech companies.

Bitcoin slid 2.4% and hovered around $101,500 in a sign of risk-off sentiment. The cryptocurrency has fallen almost 20% since reaching an all-time high above $126,000 one month ago.

Source: Yahoo Finance

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