Stock futures remained relatively stable on Tuesday evening, as the S&P 500 experienced its fourth consecutive day of losses, primarily driven by a decline in tech shares. This has investors on edge, eagerly awaiting Nvidia's earnings report, which could provide insights into the health of the AI industry.
The Dow Jones Industrial Average and S&P 500 both ended the day in the red, with the S&P 500's slide marking its longest streak since August. Meanwhile, the tech-heavy Nasdaq Composite recorded its fifth negative day in six sessions. Bitcoin's brief dip below $90,000 on Tuesday and gold's rise from a one-week low further added to the market's volatility.
Most sectors in the broader market closed higher on Tuesday, but key tech stocks, including Nvidia, Palantir, Microsoft, and Advanced Micro Devices, ended the day in the red. The Technology Select Sector SPDR Fund saw a notable 1.6% decline. Technology and consumer discretionary sectors have been the hardest hit this month, while health care has emerged as the top performer.
The weakness in tech stocks comes ahead of Nvidia's highly anticipated third-quarter results, due after Wednesday's market close. Analysts largely expect Nvidia, the largest company in the broad-market index, to significantly surpass Wall Street's expectations, driven by strong demand for its AI chips and infrastructure. However, Nvidia has a high benchmark to meet, as investors have been taking profits from their tech holdings, reflecting concerns that the AI boom has pushed valuations to unsustainable levels.
But here's where it gets controversial... Investors are also keeping a close eye on earnings reports from major retailers Target, Lowe's, and TJX Companies, which could provide insights into consumer spending trends. With the lack of economic data due to the U.S. government shutdown, these reports take on added significance.
And this is the part most people miss... Sonu Varghese, global macro strategist at Carson Group, highlights the concentration risk in tech stocks, especially those related to AI. Despite the sector's strong performance this year, investors with concentrated portfolios remain cautious and susceptible to market pullbacks.
In other news, fund managers holding unusually small amounts of cash are flashing a sell signal, according to Bank of America's Global Fund Manager Survey. Contrarians view this as a bearish indicator, suggesting that most buying has already occurred, leaving little room for further equity allocation.
Additionally, shares of companies like La-Z-Boy and ON Semiconductor moved in after-hours trading, with La-Z-Boy's strong earnings results boosting its stock price by nearly 7%. ON Semiconductor's announcement of a $6 billion stock buyback program also saw its shares rise almost 4%.
Lastly, Constellation Energy's shares rose 2.6% in extended trading after the U.S. government announced a $1 billion loan to support the restart of the Crane Clean Energy Center nuclear plant in Pennsylvania. The plant, formerly known as Three Mile Island Unit 1, is expected to resume power generation in 2027, with Microsoft as a key buyer of the power generated.
As we await Nvidia's earnings report and navigate the market's volatility, one question remains: Are we witnessing a healthy correction or the beginning of a broader tech sell-off? What do you think? Share your thoughts in the comments below!
