US stock futures experienced a decline on Tuesday, reflecting growing concerns over a potential AI bubble that continues to unsettle investors. The Dow Jones Industrial Average futures dropped by 0.7%, experiencing its worst three-day performance since April. The tech-heavy Nasdaq 100 futures fell by 0.8%, while S&P 500 futures were approximately 0.6% lower, following a challenging session for the stock market.
In the cryptocurrency sector, Bitcoin briefly fell below the $90,000 mark for the first time in seven months, exacerbating a sell-off that erased all gains the leading cryptocurrency had made this year. This downturn heightened alarm in Asian markets, where Japanese stocks recorded their most significant loss since April, contributing to a decrease in 10-year Treasury yields.
Concerns related to an AI bubble, alongside uncertainties regarding the US economy, are contributing to a “risk-off” sentiment among investors. Attention is particularly focused on two key events in the coming days that may influence market sentiment. On Wednesday, Nvidia is set to release its third-quarter results, amid increasing skepticism about the sustainability of the AI-driven market rally. An uptick in debt issuance among major technology companies is under scrutiny as analysts question the large expenses associated with building AI data centers.
Adding to investor anxiety, Wall Street is preparing for the release of the September jobs report on Thursday, which will be the first significant economic reading following the US government shutdown that delayed official data releases. Recent trading has seen expectations for interest rate cuts diminish markedly from a month ago, with current odds now at 46%.
In addition, retail earnings reports are anticipated to provide further insights into consumer behavior as the holiday season approaches. Home Depot recently lowered its full-year profit guidance after reporting earnings that fell short of expectations, causing its shares to drop nearly 4%. Major retail chains like Walmart and Target are also expected to release their earnings figures this week.
In premarket trading, notable movements were observed among various stocks. Axalta saw a 7% increase after Dulux owner AkzoNobel announced plans to merge with the company to create a $25 billion entity. Conversely, PDD Holdings experienced a 2% decline despite reporting a 9% increase in revenue, as aggressive pricing strategies appeared to influence investor sentiment. Amer Sports recorded a 6% rise after it raised its full-year guidance based on its recent third-quarter results.
Furthermore, the ongoing sell-off in the cryptocurrency market has raised alarm bells across various financial sectors. Bitcoin’s downward trajectory has escalated concerns that leveraged investors could trigger further selling pressure. This trend contributed to a more than 2% drop in the MSCI Asia Pacific Index, marking its worst performance in a month, while almost all Asian markets saw declines. As a consequence, Treasury yields experienced a decrease, and haven currencies like the Japanese yen and Swiss franc strengthened against risk-sensitive currencies such as the Australian dollar.
Amidst these developments, Baidu’s stock rose by 2% in premarket trading after the Chinese search engine exceeded Q3 revenue expectations, buoyed by robust growth in its cloud business amid a recovering advertising market. Overall, the financial landscape remains tense as investors brace for critical economic data that could shape the market’s direction in the near term.
