US stocks opened lower on Monday evening Beijing time, following last week's volatile trading. Investors continue to monitor concerns over AI valuation bubbles, sector rotation, and shifting expectations regarding Federal Reserve rate cuts. NVIDIA, a leading AI company, is set to release its earnings report this Wednesday, which may provide further clues about the AI sector's trajectory.
The Dow Jones Industrial Average fell by 79.42 points, or 0.17%, to 47,068.06. The Nasdaq Composite dropped 113.913 points, or 0.50%, to 22,786.676, while the S&P 500 declined by 20.50 points, or 0.30%, to 6,713.61.
Shares of Alphabet, Google's parent company, rose after Warren Buffett's Berkshire Hathaway disclosed a stake in the tech giant. Last week, the Nasdaq fell 0.5%, dragged down by declines in Alphabet, Amazon, Broadcom, and Meta Platforms. Despite a sharp drop on Thursday, the Dow and S&P 500 still managed slight weekly gains.
Tom Lee, head of research at Fundstrat, noted, "We had anticipated turbulence in the first weeks of November, and the market is clearly experiencing volatility now." He added, "While some concerns, such as the government shutdown and New York City's mayoral election, have eased, other risks remain. However, we expect the current turbulence to eventually give way to a rebound, with the S&P 500 potentially rising by about 200 points to break the 7,000 level."
NVIDIA's earnings report on Wednesday will be closely watched for insights into the AI sector. Additionally, quarterly results from retail giants Walmart and Home Depot will offer a glimpse into consumer demand.
NVIDIA has become a key barometer for the tech rally, with its shares surging nearly 1,000% since the launch of ChatGPT in November 2022. The stock has gained over 40% year-to-date, and last month, NVIDIA became the first company to reach a $5 trillion market capitalization.
After last week's sharp swings, markets took a breather as investors questioned whether this year's rally has been overly reliant on a handful of tech giants. Concerns about a potential tech bubble have also intensified due to high-leverage investments in AI expansion.
Jeff Krumpelman, Chief Investment Strategist and Head of Equities at Mariner Wealth Advisors, advised long-term AI investors not to be deterred. He emphasized that AI applications are still in their early stages and represent a powerful, multi-year trend. "This is a real and sustainable shift—not a repeat of the 2000 dot-com bubble," he said.
Delayed September Nonfarm Payrolls Data to Be Released Following the end of the government shutdown, statistical agencies will begin releasing delayed data, including the September nonfarm payrolls report. Although the report is expected to confirm what private surveys have already indicated—a cooling labor market—it remains significant due to the uncertainty caused by the delay.
The US government only resumed funding last weekend after the longest shutdown in history, lasting 43 days. The data delay has limited policymakers' visibility into economic conditions, with some Fed officials warning it could complicate next month's rate decision.
Ulrich Urbahn, Head of Multi-Asset Strategy at Berenberg, said, "Despite the delay, the September jobs report remains crucial as it will help clarify economic momentum and market expectations for rate cuts."
Divisions Within the Fed Concerns over a potential hawkish shift by the Fed have raised questions about whether this year's rally has gone too far. Some officials have cast doubt on further easing, leading traders to price in less than a 50% chance of a 25-basis-point rate cut in December.
Last Friday, Kansas City Fed President Schmid and Dallas Fed President Logan expressed skepticism about a December rate cut, dampening expectations. The Fed will release minutes from its October 28-29 meeting on Wednesday, which may reveal rare divisions among policymakers. Several voting members, including Jefferson, Waller, and Williams, are scheduled to speak later on Monday.
Comments