By Caroline Valetkevitch
NEW YORK (Reuters) -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%, 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% over the next two years. The comments stoked fears about stretched valuations and a potential market bubble.
Shares of Nvidia were down 4%, while an index of semiconductors also fell 4%.
Shares of Palantir Technologies dropped more than 8% 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% lower, and the Nasdaq dropped more than 2%. The Nasdaq is still up about 21% 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%, to 47,085.24, the S&P 500 fell 80.42 points, or 1.17%, to 6,771.55 and the Nasdaq Composite fell 486.09 points, or 2.04%, to 23,348.64.
After the closing bell, shares of Advanced Micro Devices were down more than 2%, even as the company forecast fourth-quarter revenue above analysts’ estimates. The stock ended the regular session down 3.7%.
MSCI’s gauge of stocks across the globe fell 11.51 points, or 1.14%, to 996.34.
The pan-European STOXX 600 index fell 0.3%.
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% chance of a rate cut in December, compared with 94% a week earlier, CME FedWatch showed.
The euro fell for the fifth straight session, and was down 0.3% at $1.1483, its weakest since August 1. Against the yen, the dollar was 0.4% 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% 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%, 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% to $3,933.67 an ounce.
(Reporting by Caroline Valetkevitch; additional reporting by Gertrude Chavez-Dreyfuss in New York and Lucy Raitano in London; Editing by Sam Holmes, Mark Potter, Sharon Singleton, Richard Chang and Aurora Ellis)
