Dow, S&P 500, Nasdaq sink as worries on AI, US economy hit markets before Nvidia earnings

US stocks retreated on Tuesday as worries about an AI bubble and the broader US economy continued to set markets on edge, with a pivotal Nvidia (NVDA) earnings report and shutdown-delayed jobs data on the horizon.

The Dow Jones Industrial Average (^DJI) fell around 0.9%, or about 400 points, coming off the worst three-day run for the blue-chip benchmark since April. The tech-heavy Nasdaq Composite (^IXIC) pulled back nearly 1%. The S&P 500 (^GSPC) was roughly 0.7% lower, eyeing its fourth consecutive losing session.

Bitcoin briefly dipped below $90,000 on Tuesday for the first time in seven months, deepening a sell-off that wiped out all of the leading cryptocurrency’s gains for the year.

Worries about an AI bubble and the US economy added to the risk-off mood, as markets start to show signs of strain. Investors are now eyeing two key tests of those concerns in coming days.

Chipmaker Nvidia’s third quarter results land on Wednesday, at a moment when investors are rethinking the durability of this year’s AI-fueled market rally. Nvidia helped lead a Big Tech slide on Tuesday, falling as much as 3%. Amazon (AMZN) and Microsoft (MSFT) also both fell around 3%.

On Thursday, Wall Street will look to the September jobs report release to help shape expectations for the Federal Reserve’s next policy moves. It’s the first major economic reading since the US shutdown delayed official data releases. Traders have pared rate-cut odds significantly from total conviction a month ago, and are now pricing in a roughly 50-50 chance of easing.

Meanwhile, data from ADP on Tuesday showed job losses slowing in the private sector heading into November. And a stream of earnings from retailers should offer insight into consumer strength ahead of the holiday season. Home Depot (HD) cut its full-year profit guidance after its earnings missed estimates before the bell, pulling its shares almost 4% lower. Results from major chains Walmart (WMT) and Target (TGT) are also set to hit this week.

LIVE 15 updates

  • Fund managers say an AI bubble is the biggest tail risk to markets

    While the “Magnificent Seven” tech stocks remain the most crowded trade in the market, investors are pointing to potential hazards ahead with the artificial intelligence investment spree.

    According to a new survey from Bank of America, fund managers now view an AI bubble as the biggest concern for markets.

    The survey conducted from Nov. 7-13 found that 45% of fund managers now believe an AI bubble is the biggest tail risk to the economy and the markets, up from 33% who cited this risk last month. Other top risks mentioned included a disorderly rise in bond yields (17%), inflation (16%), and a US consumer credit crunch (8%).

    And for the first time in 20 years, a majority of fund managers say that companies are overinvesting in capital expenditures, even as most acknowledge that AI is boosting productivity. The “magnitude & financing of the AI capex boom” largely accounted for the jump, the BofA team noted.

    “We believe that we are in a rational bubble,” economist and former PIMCO CEO Mohamed El-Erian said in an interview at Yahoo Finance’s Invest event last week. He later added that “the payoff [of AI] is so large that it is rational to have multiple investments and to overinvest.”

  • Microsoft, Amazon sink amid Redburn downgrade

    Redburn analyst Alex Haissl downgraded Amazon (AMZN) and Microsoft (MSFT) stocks to Neutral from Buy, saying their current levels are overvaluing the companies’ AI businesses.

    Both equities fell as much as nearly 4% in late morning trading.

    “It is time to take a more cautious stance on the hyperscalers and move beyond the industry’s reassuring ‘trust us – Gen-AI is just like early cloud 1.0’ narrative, which looks increasingly misplaced,” he wrote.

    Haissl is referring to the comparison Big Tech firms have drawn between their massive spending on AI data centers and their big investments in cloud infrastructure in the 2010s. The latter reaped huge benefits for the tech giants as their cloud businesses boomed.

    But the analyst said generative AI costs more and generates less revenue than companies’ traditional clouds.

    “At current valuations, investors appear to be giving management teams too much benefit of the doubt, still pricing today’s heavy capex as if it carried cloud 1.0-level returns, even though there is no clear path back to those economics.”

  • Laura Bratton

    Cloudflare sinks after its outage hits X, ChatGPT

    Cloudflare (NET) shares sank 3.6% as the internet infrastructure provider experienced an outage that hit big online platforms including X and ChatGPT.

    Cloudflare’s network serves one fifth of the world’s internet traffic, according to Reuters. The company said it believed it had fixed the outage — which began early Tuesday morning — around 9:40 am ET. But Cloudflare said some customers may still be experiencing issues.

    Earlier this week, the IT provider made news as its CEO slammed Alphabet-owned Google (GOOG), saying the tech giant is abusing its monopoly in Search to scrape web content for its AI models. The issue is something the company has been outspoken about for months.

    Despite Tuesday’s drop, Cloudflare stock is up more than 80% for the year.

  • Laura Bratton

    Nasdaq, S&P, Dow see losses deepen

    The major stock indexes saw losses of more than 1% as morning trading was underway Tuesday after each index declined fractionally at the market open.

    The Nasdaq Composite (^IXIC) led declines, at one point sinking nearly 1.9%, while the Dow Jones Industrial Average (^DJI) fell 1.3% and the S&P 500 (^GSPC) dropped 1.2%.

    Meanwhile, Amazon (AMZN) led Big Tech equities lower, sinking more than 3%. Microsoft (MSFT), Tesla (TSLA), Nvidia (NVDA), and Meta (META) all fell by over 2%.

  • Laura Bratton

    Intuit stock gains on $100 million OpenAI deal

    Intuit (INTU) is the latest company to see its shares lifted by news of a deal with OpenAI (OPAI.PVT).

    Intuit shares rose 1.5% Tuesday after climbing 3.5% in premarket trading on the announcement of an agreement with the ChatGPT maker. That gain came as stocks sank across the board in morning trading, with the Nasdaq (^IXIC) down more than 1% shortly after the market open.

    The financial management software provider will pay OpenAI more than $100 million to use the AI developer’s models in Intuit’s apps, and Intuit’s apps will be available within ChatGPT.

  • Jenny McCall

    Stocks sink at the open

    US stocks sank at the open as investors looked to upcoming jobs data that will factor into interest rate-cut bets and fears of an AI bubble continued to put pressure on tech equities.

    The tech-heavy Nasdaq Composite (^IXIC) sank 0.6%, while the S&P 500 (^GSPC) dropped 0.4%. The Dow Jones Industrial Average (^DJI) fell 0.8%, following three days of losses for the blue-chip benchmark.

    The downbeat mood Tuesday comes after a bruising session for stocks Monday.

  • Laura Bratton

    US private sector job losses slowed at the end of October: ADP data

    US private employers shed an average of 2,500 jobs per week during the four weeks that ended Nov. 1, according to fresh data from ADP Research Tuesday.

    That’s a narrower loss than the 14,250 private sector jobs shed by employers over the four weeks through Oct. 25.

    Investors have closely watched private sector employment data as the longest-ever US government shutdown delayed the release of critical federal economic data.

    Looking ahead, Wall Street is eyeing the long-awaited September jobs report from the Bureau of Labor Statistics on Thursday, which will factor into bets on the Fed’s path to interest rate cuts.

  • Klarna reports first quarterly results since going public. The stock is down.

    Shares of Swedish buy now, pay later firm Klarna (KLAR) rose in premarket trading but then reversed gains after its first quarterly results since going public beat expectations. The company also announced it will sell up to $6.5 billion in loans to Elliott Investment Management in order to further its push into the US market.

    The stock was down 1.8% as the earnings call was underway (listen here).

    Revenue grew 26% year over year to $903 million, greater than the $885 million the Street expected, while Klarna’s net loss reached $95 million in the third quarter.

    Like economic bellwether Home Depot (HD), which hinted on Tuesday that consumers are putting off home projects, Klarna offers a glimpse into how consumers’ finances are holding up. On that front, the fintech firm added more provisions for loan losses, which climbed to 0.72% of gross merchandise volume from 0.44% last year.

    Still, CEO Sebastian Siemiatkowski said in the company’s shareholder letter that “more consumers are paying early, not late.”

  • Jenny McCall

    Good morning. Here’s what’s happening today.

  • As labor market cracks begin to show, workers are turning to Uber and DoorDash

    Yahoo Finance’s Allie Canal reports:

    Read more here.

  • Jenny McCall

    Home Depot cuts forecast due to US consumer weakness

    Home Depot (HD) reported mixed third quarter earnings on Thursday, with the retail giant lowering its fiscal 2025 adjusted earnings forecast but raising its expectations for sales growth.

    Home Depot stock fell more than 3% before the bell on Tuesday.

    The AP reports:

    Read more here.

  • Jenny McCall

    Premarket trending tickers: Axalta, PDD, Amer Sports

    Axalta (AXTA) stock jumped 7% in premarket trading on Tuesday after Dulux owner AkzoNobel agreed to combine with the paint and chemicals company to create a $25 billion business.

    PDD Holdings (PDD) stock fell 2% before the bell after reporting a 9% jump in revenue. The Temu owner had made moves to slash prices and offer steep discounts ‌were bolstering demand in its home market.

    Amer Sports (AS) stock rose 6% in premarket trading after reporting third quarter results and raising its full-year guidance.

  • Fear spreads across markets as crypto sell-off raises alarms

    Bloomberg reports:

    Read more here.

  • Jenny McCall

    Chinese search engine Baidu’s Q3 revenue beats expectations

    Baidu (BIDU) stock rose 2% before the bell on Tuesday after the Chinese search engine beat market expectations for its third quarter revenue. The company was helped by strong growth in its cloud business amid a recovering ad market.

    Reuters reports:

    Read more here.

  • Asian stock markets fall following US tech drop

    AP Finance reports:

    Read more here.

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