Stocks Retreat as Wall Street CEOs Issue Warning: Markets Wrap

(Bloomberg) — The global stock rally hit a speed bump as earnings from AI bellwether Palantir Technologies Inc. failed to impress investors and Wall Street chief executives warned of a possible correction due to rich valuations.

Contracts for the S&P 500 fell 1% after the underlying index posted a modest gain Monday, even as more than 300 of its members retreated. Nasdaq 100 futures tumbled 1.3%, with Palantir declining more than 4% in extended trading on concerns about the company’s lofty valuation after a record run-up. European shares were also set for a weaker open.

Asian equities retreated 1%, with a gauge of technology companies set for its biggest drop since September. In South Korea, the market regulator issued an unusual “investment caution” on SK Hynix Inc. shares after its 240% rally.

A gauge of the dollar was flat after four days of gains, though still trading at levels last seen in August. That came amid mixed signals from Federal Reserve officials, following Chair Jerome Powell’s warning last week that a rate cut in December isn’t a foregone conclusion.

Morgan Stanley CEO Ted Pick and Goldman Sachs Group Inc.’s David Solomon were among Wall Street executives gathering at a summit in Hong Kong who flagged the possibility of a significant selloff. Investors are getting more cautious about stock valuations after the S&P 500 rallied more than 40% from lows in April, driven by tech megacap companies betting on artificial intelligence.

Corporate earnings are strong but “what’s challenging are valuations,” said Mike Gitlin, president and chief executive officer of investment manager Capital Group, on Tuesday during a financial summit organized by the Hong Kong Monetary Authority.

Palantir shares dipped in extended trading even after the company raised its annual revenue outlook to $4.4 billion and outpaced analyst estimates for third-quarter sales.

Investors have sent the firm’s shares up more than 150% so far this year, closing Monday at a record $207.18. The company had a price-to-sales ratio of 85 as of Friday — the highest in the S&P 500 Index.

Mandeep Singh, senior analyst at Bloomberg Intelligence, said that investors likely wanted more guidance about the following year. Palantir gave a forecast for the current quarter, Singh said, but everyone wanted some sense of 2026, he said.

The market reaction highlights “how stretched expectations are in the AI space,” said Charu Chanana, chief investment strategist at Saxo Markets in Singapore. “A small post-print dip says more about lofty expectations than fundamentals.”

What Bloomberg strategists say…

Investors appear to be needing fresh signals to restore faith in the bull market, which began stalling last week. Indeed, they are concerned that market leadership is concentrated. Even a small wobble in the mega-cap growth story or an unexpected macro headwind can trigger outsized moves lower.

— Mark Cranfield, MLIV strategist. For full analysis, click here.

Elsewhere, gold edged lower for a third consecutive session. Treasuries steadied, while oil fell as the market weighed OPEC+’s decision to pause output hikes. The yen strengthened after Japanese finance minister issued another set of verbal warnings on currency movements.

Shares in Australia extended their losses and the Aussie fell after the central bank held its benchmark rate unchanged. India’s rupee gained, pulling back from a near-record low after likely interventions by the Reserve Bank of India.

Also weighing on the negative sentiment Tuesday was increased uncertainty over the Fed’s policy outlook after contrasting views on the outlook for further rate cuts.

A flurry of US central bank officials offered different views Monday with Chicago Fed President Austan Goolsbee saying he’s more concerned about inflation than the job market. US factory activity also contracted for an eighth straight month in October.

Earlier, Fed Governor Lisa Cook said she sees the risk of further labor-market weakness as greater than the chance that inflation will pick up. She stopped short of endorsing another interest-rate cut next month.

Her comments echoed remarks from her colleagues who were equally noncommittal about whether the central bank should deliver a third straight rate reduction when policymakers convene in December.

San Francisco Fed President Mary Daly said officials should “keep an open mind” about the possibility of a December cut. Governor Stephen Miran noted policy remains restrictive.

“With US data softening and Fed officials keeping policy optionality alive, investors are reassessing positioning rather than chasing risk,” said Billy Leung, an investment strategist at Global X Management.

Corporate Highlights:

Starbucks Corp. is selling a majority stake in its China unit to private equity firm Boyu Capital for $4 billion to help accelerate its coffeehouse business in the country. Netflix Inc. is in talks to license video podcasts distributed by iHeartMedia Inc. as it looks to compete head-on with YouTube, according to people familiar with the conversations. Saudi Aramco reported profit that beat analysts’ estimates as a boost in production outweighed the impact of weaker oil prices. Royal Philips NV’s order intake climbed 8% in the third quarter amid robust demand for the manufacturer’s medical devices in North America. Telefónica SA will slash its 2026 dividend by half as the company’s Chairman Marc Murtra rolls out a new strategy. Nintendo Co. raised its Switch 2 sales forecast on Tuesday, bolstering confidence that the record-breaking console will sustain its strong start. Some of the main moves in markets:

Stocks

S&P 500 futures fell 0.8% as of 6:53 a.m. London time Nasdaq 100 futures fell 1.2% Futures on the Dow Jones Industrial Average fell 0.6% The MSCI Asia Pacific Index fell 0.9% The MSCI Emerging Markets Index fell 0.9% S&P/ASX 200 futures were little changed Hong Kong’s Hang Seng fell 0.6% The Shanghai Composite fell 0.5% Euro Stoxx 50 futures fell 0.8% Currencies

The Bloomberg Dollar Spot Index was little changed The euro was little changed at $1.1525 The Japanese yen rose 0.4% to 153.62 per dollar The offshore yuan was little changed at 7.1267 per dollar The British pound fell 0.1% to $1.3124 Cryptocurrencies

Bitcoin fell 2.1% to $104,655.32 Ether fell 2.6% to $3,509.36 Bonds

The yield on 10-year Treasuries declined two basis points to 4.09% Japan’s 10-year yield advanced two basis points to 1.675% Australia’s 10-year yield advanced one basis point to 4.35% Commodities

Spot gold fell 0.5% to $3,981.41 an ounce West Texas Intermediate crude fell 0.4% to $60.82 a barrel This story was produced with the assistance of Bloomberg Automation.

–With assistance from Abhishek Vishnoi, Winnie Hsu, Mark Cranfield, Cathy Chan and Joanna Ossinger.

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