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Tech-Led Gains Paused as AI, Rate Cut Hopes and Data Add Volatility

  • Market volatility is expected following recent scrutiny of major bullish trends and unpredictable economic data releases.
  • AI and chip sector stocks saw mixed movements as companies like Alphabet and Meta Platforms discussed potential chip partnerships.
  • Retail sentiment has turned bearish for key stock ETFs, with heightened attention on upcoming earnings reports from companies including Dell and HP.

Market activity remains unsettled as traders anticipate ongoing volatility driven by uncertainty in economic data and AI sector developments. On Tuesday morning, U.S. stock futures for indices such as the Nasdaq 100, S&P 500, Dow, and Russell 2000 all posted mild declines after two sessions of gains. This comes as several government economic reports, delayed from prior dates, were scheduled for release, which may further impact market movements.

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On Monday, technology stocks led a rally after some Federal Reserve officials, including Governor Christopher Waller and San Francisco Fed’s Mary Daly, expressed support for a potential rate cut in December. The Nasdaq-tracking Invesco QQQ Trust ETF jumped 2.56%, while the SPDR S&P 500 ETF increased by 1.47%. Communication services, information technology, and consumer discretionary sectors saw the most growth, and Alphabet shares reached new highs amid this optimism.

Tuesday’s caution partly stems from shifting sentiment toward major Artificial Intelligence companies. Reports indicated that Alphabet is negotiating to sell its Tensor Processing Unit (TPU) AI chips to Meta Platforms and others, sparking sharp overnight declines for NVIDIA and AMD. In contrast, Alphabet and its supplier Broadcom saw gains. Some investors are also weighing comments from investor Michael Burry, who stood by his negative outlook on Nvidia.

Investors are closely monitoring earnings releases from major tech hardware companies, such as Dell and HP, expected after Tuesday’s closing bell. Key economic data—including producer price inflation, retail sales, and housing reports—are also on the day’s schedule, with releases from the Bureau of Labor Statistics and other government agencies.

Sentiment among individual traders, as observed on Stocktwits, has shifted to “bearish” for ETFs tracking major indices. One user commented on the market’s volatility, noting the rapid swings between “extreme fear and extreme greed.” Another expressed concern about the U.S. market’s dependence on AI, stating, “All the US does anymore is AI. Any chinks in that armor…and it’s over.”

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Elsewhere, early Tuesday saw declines in crude oil and Gold futures. The 10-year Treasury note traded above 4%, while the U.S. dollar remained mostly flat against other major currencies. Most Asian equity markets ended higher, despite cautious sentiment ahead of key U.S. economic data releases. For a full list of companies reporting earnings and further schedule details on economic data releases, see this overview.

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