US equities on Wall Street continued to face selling pressure for the fourth day in a row as investor sentiment remained risk-off ahead of important events over the next two days.
The Dow Jones fell 500 points on Tuesday, taking the four-day losing streak to over 2,200 points. This is after the index recovered 200 points from the lows of the day. The S&P 500 and Nasdaq ended 0,8% and 1.2% lower respectively, after having recovered 45 and 200 points from their respective lows of the session.
Concerns surrounding the monetisation capex, results from Nvidia and the delayed by impending September jobs report, coupled with elevated valuations is prompting investors to take money off the table.
A survey of fund managers carried out by Bank of America showed that cash levels among global fund managers has dropped to 3.7%, only the 20th time such an instance has taken place since 2002. In such instances, historically, equities fall and treasuries outperform over the next one to three months, as per the survey.
The survey also stated that fund managers believe that companies are overinvesting, and that AI monetisation remains the biggest risk to the market.
All eyes are now on Nvidia, the world’s most valued company and the AI chip giant, who will be reporting its third quarter results after market hours on Wednesday. In the last 11 quarters since the launch of ChatGPT, Nvidia has surpassed revenue and Earnings Per Share (EPS) estimates in all 11 of them, while raising guidance for these parameters in eight of those.
The stock is down 15% from its peak ahead of results and analysts believe that it will be yet another strong quarter as there is no slowdown in demand for Nvidia’s products, despite the rising competition in the space.
Another warning came from JPMorgan Chase & Co. Vice Chairman Daniel Pinto, who believes that any correction within the AI segment will have ripple effects for the rest of the market and that valuations here are due for a “reassessment.” He also sees limited upside for the US markets from these levels.
Minutes of the previous Fed meeting will also be released later today. Home Depot shares fell 6% after earnings, while peers like Target, Lowe’s will be releasing their results later today, along with Nvidia.