Tech stocks resumed their rout Tuesday as market participants fretted about lofty valuations. Indeed, growth-focused technology was the only one of the S&P 500's 11 sectors to finish in the red, while beaten-down health care and energy stocks saw the biggest gains.
Nvidia (NVDA) was one of the more notable decliners, dropping 3% on news SoftBank sold its remaining stake in the artificial intelligence (AI) chipmaker for roughly $5.8 billion.
Elsewhere, CoreWeave (CRWV) plunged 16.3% after the AI infrastructure firm, which rents out NVDA chips, reported earnings. While the company disclosed higher-than-expected third-quarter revenue of $1.36 billion – more than doubling on a year-over-year basis – it gave weak full-year revenue guidance.
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"There was a problem at one data center that's impacting us," said CoreWeave CEO Michael Intrator on the earnings call, though he added that it "should be taken care of within Q1 of next year."
"This near-term supply-side issue masks significant underlying momentum," says Stifel analyst Ruben Roy. "The company's backlog nearly doubled to roughly $55.6 billion, fueled by major contracts with OpenAI and Meta, while its total contracted power pipeline expanded to about 2.9 gigawatts."
While Roy is "more optimistic on the CRWV story," he remains Hold-rated on the AI stock "until supply-side issues are overcome."
Buy the dip on Nike, says BofA
On the positive side of the ledger was Nike (NKE), with the Dow Jones stock climbing 3.9% after a bullish analyst note.
Shares have been falling since the athletic apparel and footwear maker reported impressive fiscal first-quarter results in late September, but BofA Securities analyst Lorraine Hutchinson says the pullback creates "a particularly attractive buying opportunity."
Hutchinson sees "a path toward continued improvement in sales and margins as the innovation pipeline starts to scale." She believes the company's Sports Offense strategy, which focuses on sports-based teams, enables "deeper category expertise," and its Innovation Engine allows for transformation across its entire product portfolio.
The analyst has a Buy rating on the blue chip stock and an $84 price target, representing implied upside of 33% to current levels.
At $63 per share, Nike is one of the least impactful stocks on the price-weighted Dow. However, strong gains for high-priced Amgen (AMGN, +4.6%) and McDonald's (MCD, +2.6%) provided ample tailwinds for the 30-stock index.
Indeed, the blue chip Dow Jones Industrial Average finished the day up 1.2% at 47,927 – a new record closing high – and the broader S&P 500 was 0.2% higher at 6,846. The tech-heavy Nasdaq Composite was down 0.3% at 23,468.
Job growth declines, according to ADP
In economic news, data from ADP showed that private employers shed more than 11,000 jobs, on average, each week in the four weeks ending October 25. While the numbers are preliminary and could change, they suggest "that the labor market struggled to produce jobs consistently during the second half of the month," says Nela Richardson, Ph.D., chief economist at ADP.
Wall Street has put more stock in private data releases recently as the record-long government shutdown has delayed several key economic reports. But the data floodgates could soon be opened with the government expected to resume operations this week, pending the passage of a short-term funding bill in the House of Representatives.
José Torres, senior economist at Interactive Brokers, expects the September jobs report – initially scheduled for release in early October – could be released as early as next week. He's anticipating soft results, which could lift expectations for a December rate cut.
According to CME Group's FedWatch, there's a 67% chance the Fed will issue its third straight quarter-point rate cut at its next meeting – down from 92% one month ago after Chair Powell said it wasn't a sure thing.
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