Nov 4 (Reuters) - U.S. stock indexes were on track to open lower on Tuesday following warnings of a market selloff from leading Wall Street banks and a sales forecast from AI favorite Palantir that failed to impress investors.
CEOs of Wall Street heavyweights Morgan Stanley (MS.N), and Goldman Sachs (GS.N), cautioned equity markets could be heading for a drawdown of around 10% to 15%, underscoring growing concerns over sky-high valuations.
Palantir Technologies' shares (PLTR.O), slid 8.4% in premarket trading even as the data analytics company forecast fourth-quarter revenue above analysts' estimates. The stock has jumped nearly 400% in the past year.
Wall Street indexes touched all-time highs last week and notched solid gains for October as quarterly reports from Big Tech companies signaled surging AI investments, which powered a bull run in U.S. equities this year.
However, doubts about the circular nature of the spending and the technology's monetization have resurfaced, causing investors to pull back after a breakneck rally in AI-related stocks.
"The market's been moving higher as warranted from an earnings standpoint, but at some point... it seemed like it was kind of positioning for a risk-off pullback even on the slightest disappointment," said Keith Buchanan, senior portfolio manager at Globalt Investments, referring to the market pullback as well as Palantir's results.
Shares of big tech stocks slipped, with Nvidia (NVDA.O), down 2.2%, Alphabet (GOOGL.O), losing 2.4% and Amazon.com (AMZN.O), off 2%.
The rally will be under renewed scrutiny with semiconductor company Advanced Micro Devices (AMD.O), and Super Micro Computer (SMCI.O), reporting after the bell on Tuesday.
Third-quarter earnings have been resilient so far, with more than 83% of the S&P 500 companies that have reported as of Saturday beating analyst expectations, compared to a long-term average of 67.2%, according to LSEG data.
At 08:36 a.m., Dow E-minis fell 301 points, or 0.63%, S&P 500 E-minis lost 78.5 points, or 1.14%, and Nasdaq 100 E-minis shed 402 points, or 1.57%.
The CBOE Volatility Index (.VIX), Wall Street's fear gauge, was near a two-week high.
DATA GAP DIMS DECEMBER RATE-CUT HOPES
With the U.S. government shutdown matching the record for the longest ever, private data has found renewed importance for investors and the Fed alike, with all eyes on Wednesday's ADP National Employment numbers.
Recent conflicting commentary from Fed officials has indicated differing perspectives on how the central bank will handle the data gap.
Chicago Fed President Austan Goolsbee said he was on the fence about cutting rates in December with inflation still far above the central bank's target, while Governor Stephen Miran called the current monetary policy too restrictive.
Local elections for New York's mayor and governors in New Jersey and Virginia will also be closely tracked.
Sarepta Therapeutics' (SRPT.O), shares slumped 35% before the bell after a trial for its muscle-wasting disease drug missed a key goal.
Spotify (SPOT.N), gained 2.8% after it forecast fourth-quarter profit above Wall Street expectations, while U.S.-listed shares of Shopify and Uber (UBER.N), slid 4.3% and 8.5%, respectively, after their third-quarter results.
Harley-Davidson (HOG.N), added 0.6%, while Hertz (HTZ.O), jumped 17% after both beat third-quarter revenue estimates.
Reporting by Twesha Dikshit, Purvi Agarwal and Johann M Cherian in Bengaluru; Editing by Arun Koyyur and Pooja Desai
