On Tuesday Eastern Time, the three major U.S. stock indices closed lower collectively. As of the close, the S&P 500 fell 1.17% to 6,771.55 points; the Nasdaq Composite fell 2.04% to 23,348.64 points; and the Dow Jones Industrial Average fell 0.53% to 47,085.24 points. This came after numerous Wall Street executives warned investors to prepare for a pullback, heightening concerns about overvaluation, and such a pullback is now underway.
Market analysis suggests that the S&P 500 recently posted one of its best six-month performances since the 1950s, primarily driven by the resilience of U.S. companies, the booming development of artificial intelligence, and market expectations that the Federal Reserve would continue cutting interest rates to stimulate the economy. However, the recent narrowing of gains has sparked concerns about economic fragility.
A typical case is the "AI application star stock" Palantir. Despite reporting earnings on Tuesday Eastern Time that comprehensively exceeded expectations and raising its performance guidance, its stock still closed down 7.94%. After its stock price quadrupled over the past year, its optimistic AI prospects were insufficient to offset valuation concerns.
Adding insult to injury, Michael Burry, the hedge fund manager who inspired the movie "The Big Short," disclosed just the day before that he had purchased put options on Palantir and Nvidia in the third quarter. The third-quarter 13F report from his Scion Asset Management, disclosed two weeks early, showed that the firm held put options on Palantir with a notional value of up to $912 million (equivalent to 5 million shares) and put options on Nvidia with a notional value of $186 million. Together, these positions accounted for 80% of the firm's portfolio weight.
Last week, Burry posted a suggestive message on a social media platform, including a picture of a character from the movie "The Big Short," warning that "Sometimes, we see bubbles."
Most major tech stocks fell: Intel dropped over 6%, Tesla fell over 5%, Nvidia declined nearly 4%, Google fell more than 2%, Amazon and Meta dropped over 1%, and Netflix saw a slight decline; Apple edged up slightly.
Most popular Chinese concept stocks declined, with the Nasdaq Golden Dragon China Index falling 2.05%. Pony.ai fell nearly 10%, Futu Holdings dropped over 7%, Qifu Technology fell over 5%, Bilibili declined 5%, Kingsoft Cloud and BOSS Zhipin fell over 4%, XPeng Motors and Full Truck Alliance dropped over 3%, Tencent Music and JD.com fell more than 2%, Zeekr and TAL Education Group declined over 1%; Baidu rose over 3%, and Vipshop gained over 2%.
Fawad Razaqzada from Forex.com stated: "The worry is that a handful of mega-cap tech companies are doing all the heavy lifting, which leaves the overall market vulnerable to any wobbles in the AI narrative."
In the foreign exchange market, the U.S. dollar index returned to the 100 mark, reaching its highest level since May. As of 7:50 Beijing Time, it was reported at 100.1807.
