The Wall Street downturn continued midweek as major technology names like Nvidia (NASDAQ:NVDA) and Palantir Technologies (NYSE:PLTR) pulled markets lower. Investor enthusiasm for artificial intelligence stocks, once the driving force behind 2024’s market rally, is facing a sharp reversal as concerns of overvaluation grow.
Tech Giants Under Pressure
Nvidia, which has become the poster child of the AI boom thanks to its dominance in chipmaking, tumbled 3.7% on Wednesday after dropping 3.5% the day before. Shares are still up more than 35% year-to-date, but the rapid correction shows how fragile sentiment can be. Investors are eagerly awaiting Nvidia’s upcoming earnings report, which could determine whether the company’s lofty valuation remains justified.
Meanwhile, Palantir Technologies suffered an even steeper slide, losing 5.5% on Wednesday after a 9.4% drop the prior session. Once hailed as a key player in AI-powered data analytics, Palantir has been accused of being overbought during the frenzy. Its stock had more than doubled earlier this year, but the latest Wall Street downturn highlights the risks of momentum-driven trades.
Indexes Reflect Market Caution
The declines weighed heavily on the broader indexes. The S&P 500 fell 0.6%, marking a fourth consecutive loss after recently hitting an all-time high. The Nasdaq composite, which is tech-heavy, shed 1.4%, while the Dow Jones Industrial Average slipped just 0.1%, showing more resilience thanks to strength in retail.
Treasury yields also dipped slightly, with the 10-year Treasury yield moving down to 4.29% from 4.30%. This signals investors are pricing in potential rate cuts by the Federal Reserve amid weakening economic data.
Retail Earnings Paint a Mixed Picture
Adding to the Wall Street downturn, mixed corporate earnings shaped investor sentiment.
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Lowe’s (NYSE:LOW) climbed 1.9% after beating profit expectations and announcing an $8.8 billion acquisition of Foundation Building Materials.
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TJX Companies (NYSE:TJX) jumped 4.9% on strong profit and revenue results, with management citing robust demand across its U.S. and international businesses.
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Target (NYSE:TGT), however, plunged 8.5%. While it managed to beat earnings estimates, news of CEO Brian Cornell’s departure and ongoing sales struggles spooked investors.
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Estee Lauder (NYSE:EL) fell 3.3% after forecasting weaker-than-expected earnings, blaming tariffs for a $100 million hit.
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La-Z-Boy (NYSE:LZB) sank 12.1% after missing expectations, with executives pointing to soft demand and potential restructuring efforts.
These mixed signals from retail highlight a consumer landscape still recovering unevenly in the post-pandemic economy.
Fed Policy in Focus
All eyes are now on Federal Reserve Chair Jerome Powell’s upcoming speech in Jackson Hole. Historically, the annual summit has been a platform for major policy announcements. Investors hope Powell will signal that interest rate cuts could be on the horizon, particularly after recent weak job growth reports.
So far in 2024, the Fed has held rates steady, citing concerns that tariffs under President Donald Trump’s administration might keep inflation elevated. But with economic data softening, pressure is mounting for policymakers to adjust their stance. The Wall Street downturn shows how dependent markets remain on monetary policy signals.
Global Markets React
Markets abroad showed a mixed reaction. London’s FTSE 100 rose 0.9% despite higher-than-expected U.K. inflation data, while Tokyo’s Nikkei 225 dropped 1.5% as exports faltered. Hong Kong’s Hang Seng Index gained 0.2%, lifted by a 12.5% jump in Pop Mart International shares after strong revenue guidance and a new product launch.
Outlook: Can AI Stocks Rebound?
The recent Wall Street downturn underscores the risks of concentrated bets on AI-driven stocks like Nvidia and Palantir. While the long-term promise of artificial intelligence remains strong, valuations had reached levels that many analysts considered unsustainable.
If Nvidia’s earnings beat expectations next week, confidence could return. However, if results disappoint, the sell-off may accelerate, pulling broader indexes down with it. In the meantime, investors are watching Powell’s speech closely, as any hint of monetary easing could provide a short-term floor for markets.
Featured Image – Freepik
