Stocks pulled back on Monday, plagued once again by declines in tech, as Wall Street awaited key releases this week, including Nvidia earnings and the September jobs report.
The Dow Jones Industrial Average lost 557.24 points, or 1.18%, to close at 46,590.24, as losses in the artificial intelligence chip darling along with Salesforce and Apple pushed the blue-chip index lower. The S&P 500 sank 0.92% to end the day at 6,672.41, while the Nasdaq Composite tumbled 0.84% to settle at 22,708.07.
Nvidia dropped almost 2% ahead of the company's third-quarter results, which are scheduled for after the bell on Wednesday. The chipmaker and other names in the AI trade were a source of recent pressure as investors have grown anxious about stretched valuations. Blue Owl Capital, a private credit lender, shed nearly 6% amid concerns about its heavy lending related to the AI datacenter buildout.
"It'll be, on one hand, important for Nvidia to confirm that demand is still there, that they're not seeing a slowdown," said Baird investment strategist Ross Mayfield. "But unless they take it a step further, I think it's only going to leave the second question more open-ended, which is, 'We know there's demand for compute, [so] what is the [return on investment] for the firms that are buying all of these chips?'"
"If they offer any even slightly muted guidance or forecast for demand for their chips, the market would take that poorly," he added.
Following Nvidia, Walmart will report before the market opens Thursday, and those results could offer insights into just how tapped out the consumer is and demonstrate if spending is bifurcated, the strategist said.
"Consumer stocks, especially in absence of some of this labor market data, are going to be super, super important for how the market feels about this coming holiday season," he continued.
Investors will also be eyeing Thursday's September nonfarm payrolls reading, the first to be divulged in the wake of the economic data blackout from the U.S. government shutdown. The report as well as this week's release of the Federal Reserve's October meeting minutes – even if somewhat "stale" – could offer some clarity at a time when the market is "still in a bit of a data vacuum for the next couple of weeks as the government gets back on pace," Mayfield noted.
The market has been reducing its expectations that the Fed will lower its benchmark overnight borrowing rate by a quarter percentage point at its final meeting of the year next month. Fed funds futures traders are currently calling for a roughly 45% chance of a cut, down substantially from the more than 90% probability priced in a month ago, according to the CME FedWatch tool.
Alphabet was a bright spot in Monday's session, surging 3.1% after Warren Buffett's Berkshire Hathaway revealed it had taken a stake in the Google and YouTube parent. Investors were encouraged that Berkshire still finds value in the AI name after a big run this year, although Buffett himself likely was not directly responsible for the purchase, but rather his two equity managers.
In contrast, bitcoin fell more than 2% in a sign of less risk-taking and that investor sentiment in the tech industry may be weakening. The cryptocurrency dropped below the $95,000 level on Friday.
With the day's moves, the S&P 500 is now off more than 2% in November after notching gains for six straight months. The index is off by more than 3% from its recent all-time high, but the tech-heavy Nasdaq is worse off, down more than 5% from its record. The tech sector within the S&P 500 is off by 5% this month and has fallen nearly 7% from its high.
