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AI-related stocks show market's tech reliance

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Challenger reports 183.1% surge in layoffs, worst October

in two

decades

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DoorDash ( DASH ) slides after quarterly revenue miss

(Updates to market close)

By Stephen Culp

Nov 6 (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.

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.

"Even today we were down 1%, 1.5%, but that's since been

cut in half."

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.

According to preliminary data, the S&P 500 lost 75.43

points, or 1.10%, to end at 6,721.21 points, while the Nasdaq

Composite lost 443.03 points, or 1.88%, to 23,056.77.

The Dow Jones Industrial Average fell 389.47 points, or

0.82%, to 46,921.53.

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 ( DASH ) slumped after the delivery firm reported

third-quarter profit below Wall Street expectations on rising

expenses.

Cosmetics-maker Elf Beauty ( ELF ) shares tumbled following

its disappointing annual sales and profit forecasts.

Snap jumped after the social media firm beat

third-quarter revenue estimates and announced a partnership with

Perplexity AI.

Marvell Technology ( MRVL ) advanced after Bloomberg

reported that SoftBank explored a potential takeover of the

company.