AI Profit-Taking Triggers Broad Market Pullback

U.S. stocks slid broadly on Tuesday as profit-taking in mega-cap and AI-driven names weighed on sentiment. The S&P 500 fell 1.2%, the Nasdaq Composite dropped 2.0%, and the Dow Jones Industrial Average declined 0.5%, snapping a streak of resilient performance across major benchmarks.

The session’s weakness was sparked by a sharp post-earnings decline in Palantir Technologies (PLTR –7.9%), which tumbled despite easily topping estimates and raising guidance. Investors instead focused on stretched valuations after a year of outsized gains—Palantir still trades above 200 times forward earnings—even as AI enthusiasm remains strong.

That set the tone for a wider pullback across the information technology sector (–2.3%), with semiconductor stocks leading declines. The PHLX Semiconductor Index slid 4.0% as NVIDIA (NVDA –4.0%) and AMD (AMD –3.7%) retreated ahead of AMD’s earnings release. Apple (AAPL +0.4%) was the lone “Magnificent Seven” name to post a gain, helped by reports it plans a lower-cost MacBook line to compete in the budget market.

The consumer discretionary sector (–1.9%) was another notable laggard. Tesla (TSLA –5.2%) extended recent weakness, while Norwegian Cruise Line (NCLH –15.3%) plunged after soft guidance overshadowed its earnings beat, dragging peers lower.

Communication services (–1.5%) slipped as Meta Platforms and Alphabet both fell, contributing to a 1.8% drop in the Vanguard Mega Cap Growth ETF. Meanwhile, industrials (–1.2%) saw selling after Uber (UBER –5.1%) reported mixed results, and energy (–0.9%) was weighed down by Marathon Petroleum (MPC –5.8%) following an earnings miss.

Losses were more contained in materials (–0.4%) and utilities (–0.4%), while investors rotated selectively into defensive sectors. Financials (+0.6%) led the few gainers, supported by Apollo Global Management (+5.3%) after an upbeat earnings report. Consumer staples (+0.5%), health care (+0.3%), and real estate (+0.3%) also eked out modest gains.

Breadth was decidedly negative—decliners outpaced advancers two-to-one on the NYSE and three-to-one on the Nasdaq—reflecting the day’s wide-ranging weakness. Still, the S&P 500 Equal Weighted Index (–0.7%) outperformed the market-weighted version as the dominance of the mega-caps temporarily faded.

With few macro catalysts to redirect attention, investors focused squarely on valuations and recent gains, allowing profit-taking in AI and growth names to ripple through the broader market.

Our FTinvest 11 model portfolio declined 0.4% to close at 834.34, easing for the second consecutive session as profit-taking returned to the broader market. The index slid down at the start of the session, but recovered some losses afternoon.

The day’s action echoed sentiment in the major benchmarks: the S&P 500 and Nasdaq Composite both slipped as investors rotated toward defensive sectors and reassessed lofty valuations following several sessions of strong earnings-driven rallies. FTInvest 11’s pullback mirrored that pattern, with declines in higher-beta names slightly outweighing resilience in its defensive holdings.

Despite the modest decline, the index remains firmly within its recent trading range and well above its late-October lows. The near-term focus for investors shifts to upcoming corporate results and macro data that could shape expectations for interest-rate cuts and sector leadership heading into mid-November.