(Oct 16): Stocks got hit as a disappointing outlook from Europe’s most-valuable tech company and concern about tighter US restrictions on chip sales spurred a selloff in the industry that has powered the bull market.

Equities dropped from all-time highs, with the S&P 500 down almost 1%. The Nasdaq 100 slipped 1.4%. A closely watched gauge of semiconductor firms saw its worst plunge since early September. US-traded shares of ASML Holding NV plummeted 16% after the Dutch giant cut its guidance for 2025. Nvidia Corp sank 4.5% on news US officials have discussed capping sales of advanced AI chips from the company and other American firms to some countries.

Investors got so bullish that it might be time to sell global stocks, according to an investor survey by Bank of America Corp. Allocations to equities surged, while bond exposure sank and cash levels in global portfolios fell to 3.9% in October from 4.2% last month, triggering a “sell signal”, strategists led by Michael Hartnett wrote.

“US equity markets, skewed more towards large-cap leadership, are seeing profit-taking today as earnings season ramps up against overbought/extended charts,” said Dan Wantrobski at Janney Montgomery Scott.

The S&P 500 slipped to around 5,815. The Dow Jones Industrial Average slid 0.8%. UnitedHealth Group Inc sank 8.1% on a disappointing outlook. Bank of America Corp rose as earnings beat estimates. Goldman Sachs Group Inc was little changed and Citigroup Inc sank despite solid results.

Treasury 10-year yields declined seven basis points to 4.03%. The dollar rose. Oil plunged as a repo

Weekly flows for the S&P 500 were near the largest observed this year, according to Citigroup strategists led by Chris Montagu. Positioning is very extended and sits at 98th percentile.

“We worry that valuations are getting stretched, as stocks are near ‘priced to perfection’,” said Lamar Villere, a portfolio manager at Villere & Co.

With the S&P 500 holding over 5,800, UBS Group AG’s Jonathan Golub and Patrick Palfrey were the latest to raise their year-end call for the gauge. They boosted it to 5,850 from 5,600 — while lifting their 2025 forecast to 6,400 from 6,000.

“Fiscal and monetary policy uncertainty, and potential election outcomes, make 2025 returns far from certain,” Golub wrote. That didn’t prevent him from betting that the stock market can keep powering on, noting that risks are skewed to the upside, with moderating inflation, rate cuts, improvement in low-end consumer and business activity and broad-based profit strength.

To Scott Rubner at Goldman Sachs, US stocks are set to extend their rally into the final months of the year, pushing the S&P 500 past 6,000, as corporate buyers re-enter the market and institutional investors drop their hedges.

Uploaded by Isabelle Francis