U.S. Stock Market Faces Major Downturn Amid Palantir Earnings and Cryptocurrency Volatility

According to TechFlow, retail investors experienced a challenging day in the U.S. stock market, marking the worst trading session since April. On Tuesday, a combination of Palantir's earnings report, bearish bets from a well-known short seller, and turbulence in the cryptocurrency market led to a significant sell-off of stocks and assets previously favored by retail investors. The three major U.S. stock indices fell collectively, with the Nasdaq dropping over 2%. Goldman's index tracking retail-heavy stocks plummeted by 3.6%, tripling the decline of the S&P 500 and marking the largest single-day drop since April 10. Despite the downturn, retail investors continued to purchase stocks and ETFs, with net buys reaching $560 million by 11 a.m. New York time, according to JPMorgan data. This initial buying activity contributed to a brief market rebound, narrowing the S&P 500's losses before the market reversed course again. Two key events triggered the sell-off of popular retail stocks. First, Palantir's earnings report raised concerns about its growth prospects. Despite strong third-quarter performance, doubts about the sustainability of its high valuation led to a nearly 8% drop in its stock price, which continued to decline after hours. Additionally, regulatory filings revealed that hedge fund manager Michael Burry, known for his role in 'The Big Short,' had established bearish positions on Palantir and chip giant Nvidia in the previous quarter. Burry's recent warning about market exuberance, coupled with his disclosed short positions, intensified market panic. The cryptocurrency market's volatility further exacerbated the sell-off. Bitcoin's price accelerated its decline, falling below $100,000 for the first time since June, reaching around $99,932 and breaking the 200-day moving average. Ethereum also plunged over 10%, dropping to approximately $3,225. According to Coinglass, over 342,000 traders were liquidated in the past 24 hours, with losses exceeding $1.3 billion, 85% of which were long positions. This cryptocurrency downturn follows a historic liquidity crisis three weeks ago, which led to the forced liquidation of billions in leveraged positions. Looking ahead, market sentiment remains tense. Melissa Armo, CEO of Stock Swoosh, is preparing for another potential downturn on Wednesday, advising traders to either prepare a buy list or consider selling if they cannot endure further losses.