Stocks fall after recent rally; dollar hits 4-month high vs euro
NEW YORK :Major stock indexes dropped on Tuesday, with chip stocks lower as the CEOs of Goldman Sachs and Morgan Stanley cautioned that equities could be heading for a pullback, while the dollar climbed to a four-month high against the euro.
U.S. Treasuries rose, pushing yields lower, amid a flight to safety, which also helped to support the dollar.
Cryptocurrency bitcoin fell more than 6 per cent, slipping below $100,000 for the first time since June.
Bank CEOs warned at an investment summit in Hong Kong of the prospect of a stock market correction of more than 10 per cent over the next two years. The comments stoked fears about stretched valuations and a potential market bubble.
Shares of Nvidia were down 4 per cent, while an index of semiconductors also fell 4 per cent.
Shares of Palantir Technologies dropped more than 8 per cent despite the data analytics provider reporting strong quarterly results. The company, which has more than doubled in value this year, forecast fourth-quarter results above market expectations as the rapid adoption of artificial intelligence is boosting demand for its services.
"Big Short" investor Michael Burry, known for his successful bets against the U.S. housing market in 2008, has placed bearish bets on Nvidia and Palantir, according to a regulatory filing on Monday.
The S&P 500 finished more than 1 per cent lower, and the Nasdaq dropped more than 2 per cent. The Nasdaq is still up about 21 per cent for the year so far.
"There's definitely a risk-off tone with a lot of AI stocks down, and so a little bit of flight to quality with regard to Treasuries," said Greg Faranello, head of U.S. rates strategy at AmeriVet Securities in New York.
The Dow Jones Industrial Average fell 251.44 points, or 0.53 per cent, to 47,085.24, the S&P 500 fell 80.42 points, or 1.17 per cent, to 6,771.55 and the Nasdaq Composite fell 486.09 points, or 2.04 per cent, to 23,348.64.
After the closing bell, shares of Advanced Micro Devices were down more than 2 per cent, even as the company forecast fourth-quarter revenue above analysts' estimates. The stock ended the regular session down 3.7 per cent.
MSCI's gauge of stocks across the globe fell 11.51 points, or 1.14 per cent, to 996.34.
The pan-European STOXX 600 index fell 0.3 per cent.
Optimism about AI deals has been helping stocks. On Monday, stocks gained following Amazon.com's $38 billion cloud services deal with ChatGPT creator OpenAI.
The U.S. dollar was underpinned in part by reduced bets for near-term Federal Reserve easing, with divisions within the Fed raising doubt about the prospect of another rate cut this year.
The Fed lowered rates last week but Chair Jerome Powell said a December rate cut was not a foregone conclusion. Traders are betting on a 65 per cent chance of a rate cut in December, compared with 94 per cent a week earlier, CME FedWatch showed.
The euro fell for the fifth straight session, and was down 0.3 per cent at $1.1483, its weakest since August 1. Against the yen, the dollar was 0.4 per cent lower at 153.60 yen, though the Japanese currency remained near a recent 8-1/2-month low.
Sterling tumbled after the UK finance minister pointed to "hard choices" in her upcoming budget. Sterling fell 0.9 per cent to $1.3015.
U.S. Treasury yields declined amid the broader risk-off tone in financial markets.
Because of the U.S. federal government shutdown, a closely watched monthly jobs report from the Bureau of Labor Statistics will not be available on Friday, as previously scheduled.
In afternoon trading, the benchmark 10-year yield was last at 4.089 per cent, about 1.8 basis points lower on the day.
Oil prices fell as the dollar gained. U.S. crude fell 49 cents to settle at $60.56 a barrel and Brent fell 45 cents to settle at $64.44.
Spot gold fell 1.69 per cent to $3,933.67 an ounce.
