Dow Jones, S&P 500 and Nasdaq futures are currently pointing to a lower open on Friday, with stocks likely to see further downside following the sharp pullback seen in the previous session.
Concerns about valuations may continue to weigh on Wall Street, as investors have recently expressed worries about an artificial intelligence bubble.
Valuation anxiety triggered a sell-off on Tuesday, with shares of Palantir Technologies (NASDAQ:PLTR) plunging even though the software company reported better than expected fiscal fourth quarter results and raised its revenue guidance.
Goldman Sachs (NYSE:GS) CEO David Solomon and Morgan Stanley (NYSE:MS) CEO Ted Pick also warned of a significant correction by the markets over the next one to two years.
After a rebound on Wednesday, the valuation concerns resurfaced on Thursday despite a lack of major catalysts, leading to considerable weakness amid AI players like Nvidia (NASDAQ:NVDA) and Oracle (NYSE:ORCL).
However, investors such as Louis Navellier, founder and chief investment officer at Navellier & Associates, have noted corrections are not out of the ordinary in light of the strength in the markets over the past year.
“Corrections with these levels of gains are normal and to be expected, not something to panic over,” Navellier said in a report to investors.
Navellier also said there’s “still hope for a year-end rally once the government shutdown ends and the tariff situation is resolved,” noting Nvidia’s important quarterly earnings report is still nearly two weeks away.
After coming under pressure early in the session, stocks saw continued weakness throughout much of the trading day on Thursday. The major averages more than offset the gains posted during Wednesday’s session, falling to their lowest closing levels in two weeks.
The major averages moved to the downside going into close, ending the day just off their lows of the session. The Nasdaq tumbled 445.80 points or 1.9 percent to 23,053.99, the S&P 500 slumped 75.97 points or 1.1 percent to 6,720.32 and the Dow slid 398.70 points or 0.8 percent to 46,912.30.
The sharp pullback on Wall Street came amid renewed weakness among artificial intelligence-related stocks, which led the sell-off seen on Tuesday.
Shares of Advanced Micro Devices (NASDAQ:AMD) plunged by 7.3 percent after showing a strong move to the upside over the course of the previous session. Major AI players Palantir Technologies, Oracle and Nvidia also showed significant moves to the downside.
Chipmaker Qualcomm (NASDAQ:QCOM) also tumbled by 3.6 percent despite reporting better than expected fiscal fourth quarter results and providing upbeat guidance for the current quarter.
Concerns about an AI bubble and the possibility of a near-term correction have recently weighed on investors’ minds.
Negative sentiment may also have been generated in reaction to a report from global outplacement firm Challenger, Gray & Christmas showing a sharp increase in layoff announcements in the month of October.
Challenger, Gray & Christmas said U.S.-based employers announced 153,074 job cuts in October, up 183 percent from the 54,064 job cuts announced in September and up 175 percent from the 55,597 cuts announced in the same month a year ago.
“Some industries are correcting after the hiring boom of the pandemic, but this comes as AI adoption, softening consumer and corporate spending, and rising costs drive belt-tightening and hiring freezes,” said Andy Challenger, workplace expert and chief revenue officer for Challenger, Gray & Christmas.
He added, “Those laid off now are finding it harder to quickly secure new roles, which could further loosen the labor market.”
Challenger, Gray & Christmas said employers have announced 1,099,500 job cuts through the first ten months of the year, marking the highest level of year-to-date job cuts since 2020.
Semiconductor stocks showed a substantial move back to the downside following Wednesday’s rebound, with the Philadelphia Semiconductor Index (NASDAQI:SOX) tumbling by 2.4 percent.
Significant weakness was also visible among software stocks, as reflected by the 2.2 percent slump by the Dow Jones U.S. Software Index (DOWI:DJUSSW).
Retail, airline and computer hardware stocks also saw considerable weakness, while energy stocks bucked the downtrend despite a modest decrease by the price of crude oil.