- The US equities reveal a corrective downside as the momentum rally paused.
- The market sentiment remains cautious as the US October manufacturing data offset optimism regarding trade friction.
- Investors look ahead to earnings reports by Apple, Tesla, Nvidia, and JPMorgan.
The US equities rally broke momentum after AI bellwether Palantir Technologies Inc. (NYSE: PLTR) revealed disappointing earnings. Market analysts hinted at high valuations likely to trigger a potential near-term correction.
Meanwhile, the S&P 500 (ES) fell 1.1% amid a range-bound movement on Monday, while Nasdaq 100 (NQ) futures also witnessed a 1.4% drop as investors began scrutinizing tech-heavy portfolios amid their high valuations. Palantir shares declined by 4% during after-hours trading, broadly pressuring the AI sector.
This pullback reflects the imbalance between optimistic growth forecasts and the macroeconomic headwinds. The Dow Jones Industrial Average (YM) also opened the week with a bearish outlook, cautioning the markets.
In the last few weeks, the market’s uptrend raised the megacap stock prices, pushing traders to book profits ahead of quarterly earnings. Analysts note that this phase could be a turning point for the market.
The softer US manufacturing data for October suggested modest inflation pressures, offsetting optimism regarding trade tensions. However, the fresh order signaled potential early stabilization after China suspended export controls.
Meanwhile, Amazon’s latest $38 billion deal with OpenAI highlights the rising demand for AI computing power, boosting Amazon (NASDAQ:AMZN) shares to a new peak. On the other hand, Microsoft’s new license for exporting AI chips to the UAE has boosted Nvidia (NASDAQ:NVDA), hinting at a potential revenue stream for the sector. While tech giants performed exceptionally well in the markets, reflected in the S&P 500 rally.
However, the monetary policy expectations impacted the stock market as Treasury yields rose amid a policy split among FOMC policymakers with Fed Miran favoring deep cuts and Fed Goolsbee disapproving early easing. Traders anticipate the next FOMC meeting in December to deliver no rate cut, deteriorating the risk sentiment.
Soon enough, Tesla, Apple, JPMorgan, and Nvidia are set to release reports, which are likely to influence the market’s next direction. Institutional investors are favoring safe assets like cash and bonds before further guidance. Following significant gains and excitement surrounding AI throughout the year, the market now demands concrete evidence of growth to justify current prices.
