Wall Street ends lower on tech valuations, economic jitters

By Stephen Culp

NEW YORK (Reuters) -U.S. stocks closed in negative territory on Thursday, with a resumption of Tuesday's tech selloff as investors contended with mounting economic uncertainty and stretched valuations.

All three major U.S. equity indexes lost ground as risk appetite was dampened by worries over inflated stock prices, particularly from artificial intelligence-related momentum shares.

The Philadelphia SE Semiconductor index dropped 2.4%.

AI-adjacent shares provided muscle to the rally in recent months that pushed the indexes to a series of record-setting highs, so weakness in the sector was a stark reminder of Wall Street's reliance on tech.?

"Valuations are still very much a concern longer term, but (the market is) still bullish," said Paul Nolte, senior wealth advisor & market strategist at Murphy & Sylvest in Elmhurst, Illinois. "Earlier this week, we got a draw down of 1% to 1.5%. What did we do the next day? We were up 80 basis points."

"So that buy the dip mentality is still there," Nolte added.

As the government shutdown persists, market participants must contend with a dearth of economic indicators while the data-reliant U.S. Federal Reserve is assessing the need for further near-term interest rate cuts.

With government sources dark, alternative, private sector sources have stepped in. On Thursday, executive outplacement firm Challenger, Gray & Christmas reported that corporations announced a 183.1% monthly surge in layoffs, the worst October in over two decades. Cost cutting and AI-related efforts were among the top reasons companies provided.

Separately, workforce analytics company Revelio Labs showed the U.S. economy shed 9,100 jobs last month, with government accounting for the bulk of the decline.

"The Challenger layoffs came in as disappointing, raising the prospect that the labor market is weakening faster and more than the Fed seems to be aware of," said Michael Green, chief strategist at Simplify Asset Management in Philadelphia.

"That's led to some repricing of the December rate cut that Powell suggested was very much up for debate in this last speech."

On Wednesday, the U.S. Supreme Court heard arguments over whether President Donald Trump's market-rattling tariffs represented an overreach of presidential power.

The Dow Jones Industrial Average fell?397.35 points, or 0.84%, to 46,913.65, the S&P 500 lost?75.91 points, or 1.12%, to 6,720.38 and the Nasdaq Composite lost?445.80 points, or 1.90%, to 23,053.99.?

Among the 11 major sectors of the S&P 500, consumer discretionary was the biggest drag, sliding 2.5%. Energy enjoyed the largest percentage increase.?

Third-quarter earnings season approached its home stretch, with 424 companies in the S&P 500 having reported. Of those, 83% have beaten Wall Street estimates, according to the most recent LSEG data.

Analysts now expect year-on-year S&P 500 earnings growth of 16.8%, on aggregate, for the July-September period. That marks a significant improvement over the 8.0% annual growth analysts predicted at the beginning of the quarter, per LSEG.

DoorDash slumped 17.5% after the delivery firm reported third-quarter profit below Wall Street expectations on rising expenses.

Cosmetics-maker Elf Beauty forecast annual sales and profit below expectations, and its shares tumbled 35.0%.

Snap jumped 9.7% after the social media firm beat third-quarter revenue estimates and announced a partnership with Perplexity AI.

Declining issues outnumbered advancers by a 1.97-to-1 ratio on the NYSE.?There were?141?new highs and 206 new lows on the NYSE.

On the Nasdaq, 1,264 stocks rose and 3,404 fell as declining issues outnumbered advancers by a 2.69-to-1 ratio.?

The S&P 500 posted?18 new 52-week highs and 22 new lows while the Nasdaq Composite recorded 78 new highs and 260 new lows.

Volume on U.S. exchanges was 20.77 billion shares, compared with the 20.99 billion average for the full session over the last 20 trading days.

(Reporting by Stephen Culp; Additional reporting by Twesha Dikshit and Purvi Agarwal in Bengaluru; Editing by David Gregorio)