U.S. Stocks End Tuesday Sharply Lower

(MENAFN) US equities closed sharply lower Tuesday as investors grappled with mounting concerns over inflated tech sector valuations and stark warnings from Wall Street's leading investment banks forecasting potential market corrections within the next two years.

The Dow Jones Industrial Average shed 0.53%, dropping 251.44 points to settle at 47,085.24.

The Nasdaq tumbled 2.04%, losing 486.09 points to finish at 23,348.64, while the S&P 500 retreated 1.17%, down 80.42 points to 6,771.55.

The Volatility Index (VIX), commonly called the "fear index," surged 10.66% to 19.00.

Market participants were reportedly fixated on overvaluation anxieties surrounding US technology stocks and cautionary statements from Goldman Sachs and Morgan Stanley executives warning of a potential 10% to 20% market pullback.

Despite technology firms' financial statements revealing substantial artificial intelligence (AI) investments, doubts have resurfaced regarding whether these capital expenditures will yield profitable returns. This uncertainty has prompted some investors to adopt defensive positions following AI stocks' meteoric ascent.

"It's likely there'll be a 10% to 20% drawdown in equity markets sometime in the next 12 to 24 months," Goldman Sachs CEO David Solomon told attendees at the Global Financial Leaders' Investment Summit in Hong Kong. "Things run, and then they pull back so people can reassess."

Morgan Stanley CEO Ted Pick urged investors to embrace sporadic declines, characterizing them as positive developments rather than crisis indicators.

"We should also welcome the possibility that there would be drawdowns, 10% to 15% drawdowns that are not driven by some sort of macro cliff effect," he said.

Palantir's stock plummeted 8% despite the software company's strong guidance and third-quarter earnings that were above Wall Street's projections, driven by development in its AI division.

Oracle experienced a 3.8% decline, eroding part of its over 50% gain this year. Chipmaker AMD, after more than doubling this year, also suffered a more than 3.7% decline. Additionally, Amazon fell 1.8% and Nvidia was down 4%.

Transportation platform Uber shares also dropped 5.1%, despite reporting better-than-expected third-quarter earnings.

Technology giant IBM's shares declined 1.4% after the company disclosed to media that it will cut "a low single-digit percentage" of its global workforce in the fourth quarter, which would amount to thousands of employees.

Separately, the US federal government shutdown, approaching historic duration records, continues disrupting the release of critical economic data. The absence of official economic releases compounds market uncertainty, with private sector employment data scheduled for Wednesday release by ADP emerging as a key focal point for investors.

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