The stock market experienced a downturn on Tuesday as investors took a step back from the recent rally. The Dow Jones Industrial Average dropped 324.80 points, or 0.75%, to close at 42,740.42. The S&P 500 fell 0.76% to end at 5,815.26, and the Nasdaq Composite slipped 1.01% to 18,315.59.
Nvidia’s shares plummeted 16% as the company’s CEO mentioned a more gradual recovery than anticipated. This led to a broader decline in chipmakers, with Advanced Micro Devices and Intel falling 4.7% and 5.2%, respectively. The healthcare sector also saw losses, with UnitedHealth dropping 5.4% and Walgreens sliding 8.1% after trimming its full-year earnings outlook.
Despite the declines, the three major averages remain higher for the month and appear to be on track to overcome a historically volatile season.
Market declines amid earnings forecast
Terry Sandven, chief equity strategist at U.S. Bank Wealth Management, believes that stocks may be due for a pullback but a strong earnings season and robust fundamentals could sustain them at current levels.
UBS predicts that market volatility could rise again due to uncertainty over the Fed’s policy path, Middle Eastern tensions, and the November presidential election. Piper Sandler notes that Monday’s upturn reflects a broadening market rally, with the NYSE Composite and mid-cap stocks reaching new record highs. Thomas Martin, senior portfolio manager at Globalt Investments, believes that inflation may soon return to investors’ minds as the Federal Reserve has dialed back the speed of its rate cuts.
ASML Holding, a semiconductor equipment maker, slumped 17% on Tuesday after issuing a weaker-than-expected earnings release. BTIG recommends investors rotate out of large-cap names and into small-cap and value stocks ahead of November. Wolfe Research highlights that third-quarter consensus S&P 500 operating earnings per share have been revised roughly 4% lower due to reduced oil prices.
