Wall Street is expected to open lower on Tuesday, continuing a trend of investor caution driven by faltering artificial intelligence-related stocks. Futures for the S&P 500 were down 0.6%, while the Dow Jones Industrial Average futures fell 0.7%. Nasdaq futures also declined 0.7%, signaling a broad-based retreat in equity markets. The dip comes amid mounting concerns that valuations in the technology sector, particularly around AI, may have risen too high.

AI Stocks Lead Decline

Nvidia, a bellwether for the AI market, slipped 1.1% ahead of its earnings report scheduled for Wednesday. The chipmaker has now fallen 8.6% so far this month, including a 1.9% drop on Monday. Other major semiconductor players were not spared, with Micron, Intel, and Qualcomm shedding between 1% and 2%. Investors appear cautious as anticipation builds around quarterly earnings and the broader sustainability of AI-driven stock rallies.

Tech Giants Under Pressure

Tech behemoths outside the chip sector also faced declines. Microsoft fell 1.5% while Amazon dropped 1.8%, reflecting broader worries about stretched stock prices across sectors that are closely tied to technology and global exports. The volatility highlights investor sensitivity to any signals that corporate earnings may not meet high market expectations.

Retail Sector Faces Setbacks

The retail industry experienced significant losses as Home Depot reported a disappointing quarterly profit. Shares of the home improvement chain slid 3.1% after earnings fell short of analyst forecasts. The company cited a combination of milder weather, increased consumer caution, and weakness in the housing market as contributing factors. Home Depot also lowered its adjusted earnings forecast for fiscal 2025 but raised expectations for overall sales growth.

Investors will be closely monitoring earnings reports from other major retailers this week. Target and Lowe’s are set to report on Wednesday, followed by Walmart and Gap on Thursday, providing further insight into consumer spending trends amid a challenging economic environment.

Global Markets See Broad Declines

European stocks mirrored Wall Street’s weakness, with Germany’s DAX, Paris’ CAC 40, and Britain’s FTSE 100 all falling by 1.4% by midday Tuesday. In Asia, equity markets were hit harder as investors digested higher Japanese bond yields and rising fiscal stimulus concerns. Tokyo’s Nikkei 225 dropped 3.2%, led by tech and chip companies, while Seoul’s Kospi fell 3.3%, and Taiwan’s Taiex declined 2.5%. Chinese markets were also lower, with Hong Kong’s Hang Seng down 1.7% and Shanghai Composite slipping 0.8%.

The sell-off in Asia reflects worries about rising interest rates, government spending, and currency fluctuations. The yen hovered above 155 to the U.S. dollar, near its highest level since February, highlighting broader currency pressures.

Alternative Assets Also Retreat

Other high-momentum assets, including cryptocurrencies, extended their losses. Bitcoin fell another 1% to around $91,360, near its lowest level since April. Gold was down slightly, trading just under $4,039 per ounce. The retreat in these markets underscores investor caution as expectations shift for both equities and alternative investments.

Economic Data and Federal Reserve Watch

The upcoming release of U.S. employment data, delayed by the recent government shutdown, adds another layer of uncertainty. Market participants are closely watching to see if a strong jobs report could reduce expectations for near-term Federal Reserve rate cuts. Conversely, weaker-than-expected employment figures could raise concerns about the broader economy.

Federal Reserve officials have emphasized caution, noting that lower interest rates can exacerbate inflation, which remains above the Fed’s 2% target. The uncertainty around job market data and other economic signals has prompted some policymakers to consider waiting until December before making adjustments to interest rates.

Energy Markets Stable

In contrast to equity markets, energy prices remained relatively steady. U.S. benchmark crude oil hovered just below $60 per barrel, reflecting stable supply and demand conditions despite broader market volatility.