Wall Street Woes: Concerns Rise Over Market Valuations Amidst AI Boom

U.S. stocks experienced a sharp downturn on Tuesday following alerts from major banks regarding a potential market correction, as concerns about inflated valuations intensified. The CEOs of Morgan Stanley and Goldman Sachs expressed fears of a market bubble, causing all three major U.S. stock indexes to drop into negative territory.

The S&P 500, buoyed by the artificial intelligence boom, saw its biggest one-day percentage drop since October 10, as did the Nasdaq. This decline was driven in part by losses in key tech shares, including the 'Magnificent Seven' AI-related stocks, and the Philadelphia Semiconductor Index followed suit with a 4.0% dip.

Additional market pressures arose from the nearing of a record-long U.S. government shutdown, leading to an absence of critical economic data and reliance on private sources for insights. The Dow Jones, S&P 500, and Nasdaq Composite all posted significant losses, with tech stocks suffering the most among the sectors, while financial stocks led some gains.