S&P 500 heads toward worst losing streak in months as stocks slump
US stocks fell on Tuesday alongside a slump in global stocks, amid growing concern over the valuations of AI and technology companies and fears that the Federal Reserve will not cut rates in December.
The S&P 500 fell 0.6% in early trading. A full-day drop Tuesday would be its longest losing streak since August, at four days. The tech-heavy Dow Jones and Nasdaq were also down.
The losses come as Nvidia, the world’s most valuable public company, prepares to report earnings on Wednesday, which many will view as a bellwether for the broader AI ecosystem. Fears are growing that AI stocks such as Nvidia – currently valued at around $4.6 trillion – are overinflated and an investment bubble is forming.
Russ Mould, chief investment officer at AJ Bell, said that “rarely have there been as many outcomes dependent on a set of individual outcomes” as Nvidia’s. “Even a slight disappointment could reinforce market concerns and trigger a sell-off.”
Shares of the chipmaker were down about 2.5% in early trading Tuesday morning.
JPMorgan Vice Chairman Daniel Pinto was the latest to warn Tuesday that AI shares could soon fall. “There is probably a correction here,” Pinto said Tuesday at a Bloomberg event in South Africa. “This correction will also create a correction in the rest of the segment, the S&P and the industry.”
Global stocks were also in the red on Tuesday. The declines in Japan and South Korea were followed by a fall of 1.3% for the British FTSE 100 and 1.7% for the French Cac 40.
Experts also highlighted nervousness ahead of the delayed release of a raft of U.S. economic data in the coming days, including September jobs figures, which have yet to surface due to the recent government shutdown.
If this indicates further inflation risk, it could weaken the case for the Fed to cut rates at its next meeting in December. Recent comments from Fed Chairman Jerome Powell and other policymakers have sowed more doubts about hopes for such an outcome.
Powell said after the last cut in October that “a further reduction in the policy rate at the December meeting was not inevitable, far from it.”
Boston Fed President Susan Collins said last week that it would “probably be appropriate to hold policy rates at current levels for some time to balance inflation and employment risks in this very uncertain environment.”
But Fed Governor Christopher Waller said he favored a cut in December, citing concerns about the labor market. He said Monday: “My focus is on the labor market, and after months of weakening, the September jobs report later this week or any other data in the coming weeks is unlikely to change my view that further reduction is in order.” »
The CME FedWatch tool on Tuesday put the probability of a rate cut in December at 47%, down more than 10% since last week.
