Stocks Halt Rally as Wall Street CEOs Sound Alarm: Markets Wrap
(Bloomberg) — A chorus of Wall Street executives warning investors to brace for a pullback amid lofty valuations triggered a slide in stocks amid worries about whether the market has run ahead of itself. Bitcoin sank. Bonds rose.
At a time when bulls have started questioning the need for a breather, the chiefs of giants from Capital Group to Goldman Sachs Group Inc. and Morgan Stanley noted the possibility of a pullback as a healthy development. Not only are sentiment and technical indicators flashing signs of overheating, but the narrow leadership of big techs has made some investors uncomfortable.
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“This reinforces our thinking that the stock market is ripe for some sort of material pullback over the near-term, no matter where it’s going over the intermediate/longer-term,” said Matt Maley at Miller Tabak.
Nobody needs to look hard to find warnings that stocks look frothy after a record-breaking surge from April’s nadir pushed valuations to levels associated with exuberance. Optimism has grown heated in recent months, with many traders seeming too busy chasing the upside to worry about an expensive market.
The S&P 500 recently notched one of its best six-month stretches since the 1950s fueled by the resilience of Corporate America, the booming outlook for artificial intelligence and hopes that the Federal Reserve will keep cutting rates to prop up the economy. Yet those solid gains combined with the recent narrowness of the advance spurred vulnerability worries.
There’s a clear example of that in Tuesday’s trading.
Palantir Technologies Inc. tumbled 8% even after raising its annual revenue outlook. Following an almost 400% surge in the past year, its bullish AI prospects weren’t enough to offset valuation concerns. Adding to the worries, hedge fund manager Michael Burry disclosed bearish wagers on the firm and AI chip leader Nvidia Corp.
The S&P 500 fell to around 6,800. A gauge of tech megacaps lost 1.4%. The yield on 10-year Treasuries slid three basis points to 4.08%. Bitcoin sank 4%. The dollar rose.
Corporate earnings are strong but “what’s challenging are valuations,” said Mike Gitlin, chief executive officer Capital Group, during a financial summit organized by the Hong Kong Monetary Authority on Tuesday.
On whether stocks are cheap, fair or fully valued, Gitlin said most people “would say we’re somewhere between fair and full, but I don’t think a lot of people would say we’re between cheap and fair,” he said.
His views were echoed by Morgan Stanley CEO Ted Pick and Goldman Sachs Group Inc.’s David Solomon, who said pullbacks are a normal feature of market cycles.
“Tough to argue against that,” said Elias Haddad at Brown Brothers Harriman & Co. “While the stock market rally is not irrational (backed by solid company earnings and easier monetary policy), it does reflect a degree of exuberance judging by elevated investor bullishness and options market positioning.”
While the headline sounds scary enough, the details read a lot less scary, said Bespoke Investment Group strategists, referring to the remarks from Wall Street CEOs.
“Concerns are concerns, though, and when investors worry, they sell,” they noted.
The equal-weighted S&P 500 is trading at a more than 25% discount to the US equity benchmark, data compiled by Jefferies show. That level resembles “the beginning of the end of the tech bubble” in the late 1990s, when that disparity stood at 30%. But while the parallels exist, that doesn’t mean a stock-market rout is imminent.
“Concerns regarding lofty equity market valuations led to a modest flight-to-quality that supported the Treasury market during the overnight session,” noted Ian Lyngen, Vail Hartman and Delaney Choi at BMO Capital Markets. “Worries about stretched valuations are not new given the current market conditions and fact that record-high stock prices have become the norm, not the exception.”
That being said, the BMO strategists say they are certainly sympathetic to the view that risk assets would benefit from a round of consolidation following the latest leg of the bullish repricing.
“Taking a step back, our broader concern with ever-higher stock valuations is the obvious flow-through to the wealth effect and what is implied for the pace of consumption and willingness to chase prices higher, thereby stoking any lingering inflationary pressure,” they noted.
Commodity trading advisors will be small sellers of equities under every scenario over the coming week, according to Goldman Sachs equity derivatives and flows specialist Cullen Morgan. That would follow $1.2 billion of global stock disposals by this group last week, he says.
A correction in stocks is overdue and the question is about the magnitude of it if and when it comes, says Goldman Sachs partner Rich Privorotsky. While sell triggers from CTAs are still a fair bit away, he notes that volatility-control funds likely have turned modest sellers at the moment.
The thing about corrections is their timing is never predictable, nor do they play out in a predictable way, noted Chris Low at FHN Financial. Whether the slide proves more than an opportunity to buy the dip remains to be seen, he said.
“We maintain our view that the better risk/reward opportunities lie in buying pullbacks at confirmed support following this six-month bull cycle,” said Craig Johnson at Piper Sandler.
At Janney Montgomery Scott, Dan Wantrobski says he continues to watch the 6,750-6,800 zone for initial trading support on the S&P 500. The benchmark remains overbought across multiple timeframes and thus vulnerable to air pockets and a correction in November, he noted.
“Keep your heads on a swivel,” Wantrobski concluded.
Corporate Highlights:
After its best month in the stock market in almost 25 years, Advanced Micro Devices Inc. needs to show that it truly is a major beneficiary of the artificial intelligence spending boom. That process begins with its earnings after the bell on Tuesday. WhatsApp, the popular messaging service owned by Meta Platforms Inc., introduced a standalone Apple Watch app that makes it easier for users to interact with their chats from Apple Inc.’s smartwatch without pulling out an iPhone. Uber Technologies Inc. issued a muted adjusted earnings forecast and said legal charges ate into its third-quarter profits, overshadowing strong growth in its rideshare and delivery businesses. Amazon.com Inc. alleges that a Berkshire Hathaway Inc.-owned utility in Oregon is failing to provide sufficient power for four new data center facilities, highlighting the strain rapid expansion of technology facilities is putting on the electric grid. Yum! Brands Inc. has initiated a strategic review for Pizza Hut, exploring options for the struggling chain as it falls behind in the highly competitive pizza market. Pfizer Inc. raised its 2025 profit forecast for the second time this year, as ongoing cost cuts helped make up for slow sales growth that’s driving its battle for the obesity startup Metsera Inc. Pfizer and Novo Nordisk A/S boosted their bids for Metsera Inc. as the ongoing battle for the obesity startup intensified ahead of a court battle slated for Tuesday, underscoring the surging interest in one of the fastest-growing areas in medicine. Sarepta Therapeutics Inc. plunged after a trial designed to confirm the benefits of two of its older drugs failed to show clear patient improvement, raising questions about the drugs’ future. Hims & Hers Health Inc. said it was in talks with Novo Nordisk A/S to sell its forthcoming obesity pill on the telehealth site. United States Steel Corp. sees the potential to unlock $3 billion in value thanks to its new Japanese ownership, with added earnings from Nippon Steel Corp.’s investments in new projects along with operational efficiencies. Harley-Davidson Inc., the motorcycle maker, posted lower sales in the latest quarter and indicated it faces soft demand for higher-priced bikes. Hertz Global Holdings Inc. posted better-than-expected profit in the third quarter, boosted by cost reductions in its rental fleet that offset falling revenue. Marriott International Inc. reported earnings that beat estimates, as the company’s growing hotel count helped make up for slower lodging demand. Bath & Body Works Inc. is shaking up its leadership team as its new chief executive officer moves to revive the brand after a stock plunge. Archer-Daniels-Midland Co. lowered its outlook for the year on continued uncertainty over US biofuels policy, but the crop trader remained upbeat for 2026 as it anticipates more clarity over renewables and the recent trade deal with China. Apollo Global Management Inc.’s third-quarter earnings surpassed Wall Street estimates as the buyout giant edged closer to reaching $1 trillion of assets. First Brands Group sued founder Patrick James for allegedly misappropriating hundreds of millions of dollars from the US automotive supplier that collapsed into bankruptcy in September. Spotify Technology SA reported active users and sales in the third quarter that surpassed analysts’ expectations even as ad-supported revenue fell. Nvidia Corp. and Deutsche Telekom AG are building a €1 billion ($1.2 billion) data center in Germany to bolster infrastructure in Europe that can power complex artificial intelligence systems. Fresenius Medical Care AG reported lower-than-expected profit, weighed down by sluggish dialysis volumes in the key US market and a weaker dollar. The stock plunged. Stellantis NV is recalling just over 320,000 Jeep plug-in hybrids in the US over risk the vehicles’ batteries will catch fire. BP Plc’s profit exceeded expectations, with operational improvements and higher oil and gas production outweighing lower prices, as the company’s turnaround plan builds momentum. Saudi Aramco posted a surprise increase in third-quarter profit as a production boost helped mitigate the impact of lower crude prices and snapped a years-long streak of falling earnings at the oil giant. Codelco lowered its annual copper output guidance for the second time in three months after a collapse at its top mine, while saying it still hopes to produce more than last year. Some of the main moves in markets:
Stocks
The S&P 500 fell 0.7% as of 11:34 a.m. New York time The Nasdaq 100 fell 1.3% The Dow Jones Industrial Average fell 0.3% The Stoxx Europe 600 fell 0.3% The MSCI World Index fell 0.7% Bloomberg Magnificent 7 Total Return Index fell 1.4% The Russell 2000 Index fell 0.9% Palantir fell 7.8% Currencies
The Bloomberg Dollar Spot Index rose 0.2% The euro fell 0.2% to $1.1492 The British pound fell 0.7% to $1.3046 The Japanese yen rose 0.5% to 153.49 per dollar Cryptocurrencies
Bitcoin fell 4% to $102,554.45 Ether fell 3.6% to $3,472.21 Bonds
The yield on 10-year Treasuries declined three basis points to 4.08% Germany’s 10-year yield declined one basis point to 2.65% Britain’s 10-year yield declined two basis points to 4.42% The yield on 2-year Treasuries declined three basis points to 3.58% The yield on 30-year Treasuries declined two basis points to 4.67% Commodities
West Texas Intermediate crude fell 0.6% to $60.71 a barrel Spot gold fell 0.8% to $3,969.61 an ounce ©2025 Bloomberg L.P.
