Traders work on the floor at the New York Stock Exchange (NYSE) in New York City, U.S., October 29, 2025. REUTERS/Brendan McDermid

By Twesha Dikshit and Purvi Agarwal

(Reuters) - Wall Street's main indexes slipped to over one-week lows on Tuesday following warnings of a market selloff from some big U.S. banks, while an upbeat sales forecast from AI favorite Palantir failed to impress investors.

CEOs of Wall Street heavyweights Morgan Stanley and Goldman Sachs cautioned that equity markets could be heading for a drawdown of around 10% to 15%, underscoring growing concerns over sky-high valuations.

Shares of Palantir Technologies slid 8.7% even as the data analytics company forecast fourth-quarter revenue above analysts' estimates. The stock has jumped nearly 400% in the past year.

Shares of big tech stocks also slipped, with Nvidia down 2.1%, Alphabet losing 1.6% and Microsoft off 1%. The information technology sector was the biggest drag on the S&P 500, down 1.5%.

At 09:45 a.m. ET, the Dow Jones Industrial Average fell 301.32 points, or 0.64%, to 47,035.36, the S&P 500 lost 62.20 points, or 0.90%, to 6,790.53 and the Nasdaq Composite lost 291.37 points, or 1.22%, to 23,543.35.

The CBOE Volatility Index, Wall Street's fear gauge, was near a two-week high.

Wall Street indexes touched all-time highs 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.

The rally will be under renewed scrutiny with semiconductor company Advanced Micro Devices and Super Micro Computer reporting after the bell on Tuesday.

Third-quarter earnings have been resilient, 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.

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.

Markets will also be watching for more clues from Fed officials for some clarity on how the central bank will handle the gap.

Local elections for New York's mayor and governors in New Jersey and Virginia will also be closely tracked.

Among stocks, Uber slid 8.6% after the ride-hailing platform missed quarterly operating profit expectations, while Henry Schein gained 13.4% after raising its annual profit forecast.

Spotify and U.S.-listed shares of Shopify reversed premarket gains to fall 3.5% and 3.1%, respectively, after their quarterly results.

Declining issues outnumbered advancers by a 4.18-to-1 ratio on the NYSE and by a 3.97-to-1 ratio on the Nasdaq.

The S&P 500 posted five new 52-week highs and seven new lows while the Nasdaq Composite recorded 16 new highs and 137 new lows.

(Reporting by Twesha Dikshit, Purvi Agarwal and Johann M Cherian in Bengaluru; Editing by Pooja Desai and Arun Koyyur)