U.S. stocks closed in negative territory Thursday, with a resumption of Tuesday's tech selloff as investors contended with mounting economic uncertainty and stretched valuations.
All three major U.S. equity indexes lost ground as risk appetite was dampened by worries over inflated stock prices, particularly from artificial intelligence-related momentum shares.
AI-adjacent shares provided muscle to the rally in recent months that pushed the indexes to a series of record-setting highs, so weakness in the sector was a stark reminder of Wall Street's reliance on tech.
"Valuations are still very much a concern longer term, but (the market is) still bullish," said Paul Nolte, senior wealth advisor & market strategist at Murphy & Sylvest in Elmhurst, Illinois. "Earlier this week, we got a draw down of 1% to 1.5%. What did we do the next day? We were up 80 basis points."
"So that buy the dip mentality is still there," Nolte added.
"Even today we were down 1%, 1.5%, but that's since been cut in half."
As the government shutdown persists, market participants must contend with a dearth of economic indicators while the data-reliant U.S. Federal Reserve is assessing the need for further near-term interest rate cuts.
With government sources dark, alternative, private sector sources have stepped in. On Thursday, executive outplacement firm Challenger, Gray & Christmas reported that corporations announced a 183.1% monthly surge in layoffs, the worst October in over two decades. Cost cutting and AI-related efforts were among the top reasons companies provided.
Separately, workforce analytics company Revelio Labs showed the U.S. economy shed 9,100 jobs last month, with government accounting for the bulk of the decline.
"The Challenger layoffs came in as disappointing, raising the prospect that the labor market is weakening faster and more than the Fed seems to be aware of," said Michael Green, chief strategist at Simplify Asset Management in Philadelphia.
"That’s led to some repricing of the December rate cut that Powell suggested was very much up for debate in this last speech."
On Wednesday, the U.S. Supreme Court heard arguments over whether President Donald Trump's market-rattling tariffs represented an overreach of presidential power.
According to preliminary data, the S&P 500 lost 75.43 points, or 1.10%, to end at 6,721.21 points, while the Nasdaq Composite lost 443.03 points, or 1.88%, to 23,056.77. The Dow Jones Industrial Average fell 389.47 points, or 0.82%, to 46,921.53.
Third-quarter earnings season approached its home stretch, with 424 companies in the S&P 500 having reported. Of those, 83% have beaten Wall Street estimates, according to the most recent LSEG data.
Analysts now expect year-on-year S&P 500 earnings growth of 16.8%, on aggregate, for the July-September period. That marks a significant improvement over the 8.0% annual growth analysts predicted at the beginning of the quarter, per LSEG.
DoorDash slumped after the delivery firm reported third-quarter profit below Wall Street expectations on rising expenses.
Cosmetics-maker Elf Beauty shares tumbled following its disappointing annual sales and profit forecasts.
Snap jumped after the social media firm beat third-quarter revenue estimates and announced a partnership with Perplexity AI.
Marvell Technology advanced after Bloomberg reported that SoftBank explored a potential takeover of the company.