US open: Stocks mostly lower; tech sector under pressure again

(Sharecast News) - US stocks were mostly lower in early trade on Tuesday, with tech names under pressure after solid gains in the previous session, as investors digested a couple of uninspiring data releases.

At 1555 GMT, the Dow Jones Industrial Average was up 0.4%, but the S&P 500 and the tech-heavy Nasdaq were down 0.3% and 0.9%, respectively.

Investors were taking a breather following Monday's huge gains - the S&P 500 and Nasdaq surged 1.5% and 2.3% respectively - on the back of hopes that the longest government shutdown in American history could soon come to an end.

Kathleen Brooks, research director at XTB, said: "The main news that is dominating financial markets on Tuesday is that the US shutdown could come to an end as soon as tomorrow, when the Senate funding bill reaches the House of Representatives.

"However, after Monday's euphoric reaction to news that the US Senate had passed a bill that would provide a stop gap funding measure for some agencies through to January 30th and others to Septemner next year, the rally has faded on Tuesday."

On the macroeconomic front, the latest data from NFIB showed that small business confidence deteriorated in October.

The small business optimism index fell 0.6 points to 98.2, but remained above its 52-year average of 98.0. Analysts were expecting a reading of 98.3.

Meanwhile, the uncertainty index was down 12 points from September to 88.0, marking the lowest reading this year.

NFIB chief economist Bill Dunkelberg said: "Optimism among small businesses declined slightly in October as owners report lower sales and reduced profits.

"Additionally, many firms are still navigating a labour shortage and want to hire but are having difficulty doing so, with labour quality being the top issue for Main Street."

Elsewhere, a report from ADP showed the private sector shed an average of 11,250 jobs per week in the four weeks to 25 October.

ADP said the data suggests that "the labour market struggled to produce jobs consistently during the second half of the month".

The most recent monthly report from ADP, out last week, showed the private sector added 42,000 jobs in October.

Axel Rudolph, senior technical analyst at IG, said: "US small business optimism weakening to a six-month low and private jobs growth faltering in late October put a dampener on US indices."

In equity markets, Nvidia-backed CoreWeave tumbled after reporting better-than-expected third-quarter revenue growth but issuing disappointing guidance for the coming quarter.

Nvidia, which jumped nearly 6% on Monday, was in the red after Japan's SoftBank sold a stake in the chip designer for $5.83bn.

Nvidia's Magnificent Seven peers - Alphabet, Amazon, Apple, Tesla, Meta Platforms and Microsoft - were also lower.

Brooks said: "The AI trade is once again causing jitters in financial markets, after another big investor raised concerns about an AI bubble. Last week it was Scion Capital's Michael Burry, who said that he was selling key AI names including Nvidia.

"On Tuesday, SoftBank announced that it was selling its entire Nvidia stake for a decent $5.83bn. SoftBank did not elaborate on the sale of the stake, however, the CFO said that he could not tell if AI was in a bubble or not, when your stake is worth more than $5bn, its probably better not to take too many risks.

"For the wider investment community, when big investors cash out of their AI positions, they will take notice, and this is why the stock is declining today."