NYSE
Futures tied to the Dow Jones Industrial Average fell 292 points, or 0.6%. S&P futures slipped 1%, while Nasdaq 100 futures ticked down 1.3%.
Palantir shares shed 7% in premarket trading even as the software company beat Wall Street’s estimates for the third quarter and gave strong guidance, fueled by growth in its artificial intelligence business. Palantir sees $1.33 billion in revenue for the current period, higher than the $1.19 billion expected by analysts, according to LSEG. Revenue in the prior quarter jumped 63%.
“Their results were good but markets were disappointed at the lack of company visibility for the whole of 2026,” wrote Deutsche Bank strategist Jim Reid. He also alluded to valuation concerns around Palantir.
Palantir, which was up 173% this year through Monday, trades at more than 200 times forward earnings, so investors in that name and the other AI stocks expect the companies to keep ratcheting up their profit and revenue guidance by a large magnitudes in order to justify continuing to buy the shares. Palantir’s current P/E heading into Tuesday’s trading was approaching 700.
Oracle, which sports a current P/E of 60 and forward P/E of 35, shed 2% in premarket trading, chipping away at its 55% gain this year. Chipmaker AMD, which has more than doubled this year and has a current P/E of 149, lost more than 2%. Other AI stocks such as Nvidia and Amazon fell more than 1% each in the premarket.
AI stock gains have driven the S&P 500’s forward price-earnings ratio to above 23, near the highest levels since 2000, per FactSet.
Investors were also unnerved by comments from chief executives at Goldman Sachs and Morgan Stanley. Overnight, Goldman’s David Solomon said it’s “likely there’ll be a 10 to 20% drawdown in equity markets sometime in the next 12 to 24 months.” Morgan Stanley CEO Ted Pick also said: “We should also welcome the possibility that there would be drawdowns, 10 to 15% drawdowns that are not driven by some sort of macro cliff effect.”
Wall Street is coming off a mixed session. The S&P 500 and Nasdaq ended Monday higher, while the Dow fell more than 200 points. The S&P 500 through Monday was only about 1% away from a record having closed above 6,800 for the first time ever last month, a period where the major benchmark tacked on another 2% gain.
More than 300 stocks in the broad-market index closed in the red on Monday, adding to concerns about weak breadth and high levels of tech concentration — particularly after the number of S&P 500 stocks that gained last month was smaller than the amount that declined.
“Our biggest complaint about U.S. equities is the extremely disjointed state of breadth, whereby a handful of tech mega-caps have masked some significant red flags beneath the surface,” wrote Adam Crisafulli of Vital Knowledge in a note.
Other worries include a government shutdown, which at 35 days has tied the record for the longest in history, as well as concerns whether the Federal Reserve will deliver a third-straight rate cut when it next meets in December. Investors are expecting lower rates to justify higher valuations for stocks and prop up a slowing economy and job market.
Fed Governor Lisa Cook said Monday that December’s decision would depend on incoming data and whether the effects of tariffs on inflation were easing.