Markets Waver as Valuation Fears Resurface: Tech and Crypto Lead Broad Pullback

Stocks fell sharply Tuesday as a string of warnings from major Wall Street executives reignited concerns about stretched valuations, particularly in tech and AI-driven names. Despite strong earnings and resilient economic conditions, sentiment turned risk-off as investors grew cautious about the narrowness of recent gains. The S&P 500 and Nasdaq saw notable declines, and crypto markets tumbled, while Treasury yields eased and the dollar strengthened.

Key Headlines & Market Movers

• Wall Street Sounds the Alarm on Valuations: A chorus of high-profile executives, including leaders from Goldman Sachs, Capital Group, and Morgan Stanley, called for caution amid growing signs of market froth. The concern centers on elevated valuations, especially in AI-linked tech names, and a rally increasingly concentrated in a small group of stocks. Strategists across firms suggested a pullback is healthy and perhaps overdue, with some comparing current dynamics to the late 1990s tech bubble.

Tech Rout Underscores Fragile Leadership: Mega-cap tech and AI names led Tuesday’s declines. Palantir fell 8% despite raising guidance, weighed down by valuation concerns and bearish bets from Michael Burry. Nvidia, AMD, and Tesla also sold off, while Micron and Intel dropped 7% and 6%, respectively. With the Nasdaq down over 2%, the reversal highlights how dependent the broader rally has become on a narrow slice of the market, and how quickly sentiment can shift.

• Risk-Off Sentiment Hits Crypto and Commodities: Bitcoin tumbled nearly 6%, briefly dipping below $100,000 as speculative assets took the brunt of the selloff. Ether plunged 11%. Gold fell 1.6% and oil prices also retreated, despite strong earnings from BP and Saudi Aramco. The dollar strengthened, reflecting a flight to safety amid the tech-led pullback and renewed caution about near-term equity prospects.

Earnings Recap - Strength Meets Selective Reaction: Corporate results were generally strong, but investor reactions were highly selective. Hertz spiked 36% on cost-cutting success, while Marriott gained 3% on solid results. In contrast, Uber fell 5% on legal charges, and Norwegian Cruise Line sank 15% despite earnings, dragging peers lower. Sarepta Therapeutics dropped 33% after disappointing trial results, while Denny’s surged 50% on buyout news. These divergent moves underscore a more discerning market mood.

S&P 500 Sector Performance

Looking Ahead

The recent pullback may mark the start of a consolidation phase, as investors digest gains from one of the strongest six-month stretches in decades. While the medium-term outlook remains constructive, supported by earnings strength, easing policy, and AI optimism, short-term risks are rising. Market breadth remains a key watchpoint, and dips may present selective buying opportunities for long-term investors, but caution is warranted. As always in late-cycle rallies, discipline will matter more than momentum.

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