US stocks slide on Tuesday morning as large‑cap AI names came under pressure and traders weighed fresh signs of a cooling labor market. The S&P 500 opened 0.2% lower, led by losses in technology and communications services. The Nasdaq 100 fell 0.4%, while the Dow Jones Industrial Average edged up 0.2%.
Key Points
A pullback in mega‑cap semiconductors set the tone. Nvidia Corp. was the biggest early drag on the S&P 500 after SoftBank Group Corp. sold a $5.83 billion stake to fund other AI investments. Against a two‑day rally, several strategists warned that recent gains could be fleeting, and US stocks slide as questions around valuation and earnings momentum resurface.
US stocks slide as AI momentum cools
The session opened with technology leading the declines, reinforcing concerns that AI‑linked valuations may have outrun fundamentals. CoreWeave Inc. shares dropped after the company trimmed its annual revenue outlook, and JPMorgan shifted its rating to neutral from overweight. Together with weakness in Nvidia, the moves underscored a broader reassessment of AI enthusiasm and helped US stocks slide in early trade.
Tom Essaye, founder and president of the Sevens Report, captured the valuation unease, writing that “the market remains expensive on a fundamental basis even when considering AI enthusiasm in its most potent state.” That sentiment fed through sector‑wide, with investors recalibrating exposure to fast‑growing names that had led the year’s advance.
Index moves highlight a narrow market
The early drop left the S&P 500 down 0.2% at the open, while the tech‑heavy Nasdaq 100 declined 0.4%. Communications services joined technology at the bottom of the leaderboard. In contrast, the Dow rose 0.2%, reflecting strength in a handful of blue chips. The divergence reinforced the idea that the market’s leadership remains concentrated and prone to air pockets — a setup that can see US stocks slide even as select industrial or defensive names gain.
Matt Maley, chief market strategist at Miller Tabak + Co., cautioned that the prior two sessions of gains might be “just a head fake.” He added that “there are still reasons to think that the stock market could finally see a near‑term decline of more than 3%.” The market has not experienced a pullback of that magnitude since April.
Short sellers re‑emerge as valuations face scrutiny
Positioning data also tilted risk‑averse. Citi Research reported that investors added $3.75 billion in net new short bets on the Nasdaq over the past week. Analysts led by Chris Montagu wrote that “new shorts have dominated flows across US equities,” and that the trend had been “accelerating through the past week.” Rising bearish positioning compounds the pressure when sentiment turns, helping US stocks slide as momentum traders step back.
Labor signals add to caution
A softer labor backdrop added another layer to the morning tone. ADP data showed that US private payrolls fell by an average of 11,250 positions per week in the four weeks to Oct. 25. Additionally, US small business optimism dropped to a six‑month low in October on deteriorating earnings and concerns about the economic outlook. Those figures suggested a cooler hiring pulse and shakier confidence, both of which weighed on risk appetite and helped US stocks slide despite a modest rise in the Dow.
For investors parsing the macro picture, the labor updates are notable because they intersect with valuation. If growth slows while multiples remain elevated, equity risk premiums can compress. That dynamic is especially sensitive in the highest‑valued corners of technology, where earnings durability and demand visibility are closely watched.
Nvidia in focus after SoftBank’s stake sale
Nvidia’s retreat carried outsized influence. The chipmaker has been a bellwether for AI hardware demand and a heavyweight in major US benchmarks. News that SoftBank sold a $5.83 billion position to fund other AI investments prompted profit‑taking and refocused attention on whether the extraordinary gains of the past year leave the stock vulnerable to incremental disappointments. As one of the week’s largest single‑name drags, Nvidia’s setback helped US stocks slide and amplified sector weakness.
CoreWeave’s guidance cuts through the AI trade
CoreWeave’s drop after a trimmed revenue forecast — along with JPMorgan’s downgrade to neutral — added to the narrative that expectations may need resetting. While company‑specific guidance cuts can be read as signals about demand timing and cost trends within the broader AI ecosystem. That link helped extend selling into related names and kept US stocks slide momentum intact.
Valuation debate returns to center stage
Several market voices framed the day’s action as a valuation check. Essaye’s comment that the market remains expensive even with peak AI excitement was echoed in trading flows, where shorts increased and leadership narrowed. For some participants, the question is whether earnings revisions can re‑accelerate enough to justify current multiples. Until that is clearer, spikes in volatility around news — such as stake sales or outlook changes — are likely to persist and can make US stocks slide even on modest headlines.
Policy and liquidity considerations
Even with the risk‑off tone, some strategists highlighted potential supports. JPMorgan’s Market Intelligence team noted that the end of the US government shutdown could release more liquidity into markets. That prospect stands as a counterweight to near‑term caution and may help stabilize sentiment if it feeds into improved funding conditions. Still, the immediate impulse from valuations and labor data kept US stocks slide narratives front and center during the morning session.
What the day’s setup means for investors
- Breadth remains narrow. Tech and communications services led the early decline, emphasizing a market where leadership concentration can magnify swings.
- Positioning has turned more defensive. The $3.75 billion in new Nasdaq shorts signals a larger cohort preparing for pullbacks.
- Macro updates are leaning softer. The ADP private‑payrolls trend and small business sentiment suggest a cooling backdrop that can challenge premium valuations.
- Stock‑specific headlines still matter. Nvidia and CoreWeave reminded investors that individual news can quickly ripple through AI‑linked trades.
Those elements have combined to make US stocks slide at the index level, even as selected Dow components held up. Whether the weakness deepens will hinge on incoming corporate outlooks, further labor signals, and how investors respond to shifting liquidity as government operations normalize.
Market outlook: near‑term tests ahead
With a two‑session rally in the rearview, Tuesday’s fade arrives as a potential inflection. Maley’s warning about a possible decline of more than 3% — a move not seen since April — underscores the fragility of sentiment when leadership is narrow and valuations are debated. That backdrop explains why US stocks slide quickly when focal names stumble and why short interest has grown as a hedge.
At the same time, the day’s mixed tape shows that not all segments are moving in lockstep. The Dow’s early gain points to rotation rather than uniform risk‑off, suggesting investors are selectively shifting exposure rather than exiting equities altogether. If liquidity improves alongside a measured cooling in labor conditions, index moves could remain choppy but range‑bound.
For now, the takeaway is straightforward: as AI favorites reset and economic signals soften, US stocks slide on valuation fatigue and caution around earnings durability. Investors will watch whether the next set of corporate updates and labor prints confirms a slowdown — or calms the debate and invites dip‑buyers back into the high‑growth trade.
Conclusion
US stocks slide in early Tuesday trading as AI leaders retreat and labor indicators soften. The S&P 500 opened down 0.2%, the Nasdaq 100 lost 0.4%, and the Dow rose 0.2%. Nvidia fell after SoftBank’s $5.83 billion sale, CoreWeave declined following a revenue outlook cut and a JPMorgan downgrade, shorts increased on the Nasdaq, and small business optimism hit a six‑month low. With valuation questions back in focus, strategists see room for near‑term chop — even as some expect liquidity to improve with the end of the government shutdown.
FAQ’s
Why did US stocks slide today?
Tech and communications led losses as AI valuations faced scrutiny. Nvidia fell after SoftBank’s $5.83B stake sale, and CoreWeave cut guidance, knocking sentiment.
How did Nvidia perform, and what triggered the drop?
Nvidia was the biggest S&P 500 drag after SoftBank sold shares to fund other AI bets. The move revived concerns about stretched chip valuations.
What labor data pressured the market?
ADP showed private payrolls fell by an average of 11,250 per week to Oct. 25, while small‑business optimism hit a six‑month low, tempering risk appetite.
Are traders turning more bearish on tech?
Yes. Citi Research noted about $3.75B in net new Nasdaq short positions last week, with short activity accelerating across U.S. equities.
Article Source: Bloomberg
