U.S. stock markets took a sharp turn lower on Tuesday, as mounting concerns about overvalued tech stocks, especially in the artificial intelligence space, collided with diminishing hopes for imminent interest‑rate cuts. The S&P 500 slipped around 0.8 % while the Dow Jones Industrial Average lost roughly 1.1 %, equivalent to about 500 points, and the Nasdaq Composite fell 1.2 %.
The driver of the malaise on Wall Street: heavy losses among leading AI‑ and tech‑oriented companies. Nvidia Corporation, a bellwether of the AI surge, dropped approximately 2.8 % this session and is now more than 10 % below its recent high—matters that elevate its influence on major indices. Analysts warn that valuations in the AI sector are increasingly “frothy,” with some fund managers citing an “AI bubble” as the greatest risk to equities.
Compounding the mood: investors are recalibrating expectations about how soon and how aggressively the Federal Reserve might cut rates. With inflation still proving sticky, the probability of a December cut has fallen significantly, reducing one pillar of support that many had counted on. Elsewhere, risk assets such as Bitcoin slipped below the US$90,000 mark before rebounding slightly, signalling reduced appetite for speculative positions.
On the corporate front, earnings disappointments and technical glitches added fuel to the fire. For example, companies like Home Depot missed expectations and lowered guidance, while Cloudflare suffered an outage that disrupted major services, amplifying unease about operational risks in tech.
Despite the pull‑back, some strategists view Tuesday’s drop as a potential healthy “reset” after months of relentless gains, particularly for large‑cap growth names. However, they caution that the mood remains fragile and that future volatility is a real possibility unless clarity around earnings, policy and valuation emerges.
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