S&P 500 eases for a 4th day; valuation worries weigh, Home Depot drops

U.S. stocks eased on Tuesday, with the S&P 500 set for a fourth day in a row of losses as valuation worries hit big technology-related shares and a disappointing forecast pressured Home Depot.

Quarterly results from artificial intelligence and market leader Nvidia are due after the bell on Wednesday. The U.S. earnings season is near its end, but Nvidia’s results will be closely watched by investors worried about market gains tied to AI exuberance. Nvidia’s shares were down 1.6%.

The September U.S. jobs report is set to be released on Thursday after being delayed because of the long government shutdown. Earlier private market surveys have pointed to a cooling labor market. Data Tuesday showed the number of Americans on jobless benefits surged between mid-September and mid-October.

Shares of Home Depot dropped 4.4% after the home improvement chain gave a forecast for full-year profit that disappointed and missed quarterly earnings estimates.

Home Depot aside, earnings for this reporting period have been much stronger than expected. Year-over-year earnings growth for the S&P 500 is now at 16.9%, well above the 8.8% estimated at the start of October, according to the most recent LSEG data.

“You’re having this massive sentiment correction during a period where earnings is delivering maybe above bull expectations, and, yet, there’s so much fear circulating in the market,” said Marta Norton, chief investment strategist at retirement and wealth services provider Empower.

The Dow Jones Industrial Average fell 315.68 points, or 0.68%, to 46,274.56, the S&P 500 lost 22.75 points, or 0.34%, to 6,649.66 and the Nasdaq Composite lost 148.12 points, or 0.65%, to 22,559.96.

Concerns over high valuations and dwindling expectations of a December interest rate cut have led to a pullback in U.S. stocks, with the S&P 500 down more than 3% from its October peak.

The CBOE Volatility Index, Wall Street’s fear gauge, hit a one-month high earlier on Tuesday.

The S&P 500 and the Nasdaq both closed below their 50-day moving averages on Monday, an important technical threshold, for the first time since late April.

There were 55 new highs and 224 new lows on the NYSE. On the Nasdaq, 2,519 stocks rose and 2,084 fell.

Reverse stock splits globally have climbed to a record this year, underscoring the strain on small-cap companies struggling to stay listed even as an AI-fueled rally lifts technology heavyweights to fresh highs.

Companies carried out a record 288 reverse splits through the end of October, compared with just 53 traditional splits, according to research firm Wall Street Horizon.

Nearly 80% of the companies that executed reverse splits had a market value below $250 million, a Reuters analysis of the data showed.

Reverse stock splits consolidate multiple shares into one and are typically used to lift a company’s share price above exchange-listing requirements.

They are often viewed as a sign of financial stress, unlike traditional stock splits, which reduce the price per share and tend to draw increased interest from retail investors.

The record gap between reverse and traditional splits this year highlights a widening divide in equity markets, with struggling small caps using financial maneuvers to support their share prices while megacaps extend a powerful rally driven by AI and technology spending.

“Slower earnings growth and higher funding costs have exacerbated the problems at smaller companies,” said Brett Mitstifer, chief investment officer of private banking and wealth management at Flagstar Bank.

Small caps represent just 1.2% of total U.S. market capitalization, close to a 100-year low and well below the historical average of 3.6%, according to data from Pzena Investment Management.

By contrast, AI-linked and large technology stocks have driven 75% of the S&P 500’s returns between November 2022, when OpenAI launched ChatGPT, and September 2025, J.P. Morgan Asset Management said.

Major companies including Netflix, ServiceNow, Apple, Amazon.com, Nvidia and Walmart have split their shares in recent years as they pushed deeper into the megacap ranks.