U.S. stocks closed sharply lower on Tuesday as big banks warned that equity markets could be headed for a drawdown, reflecting mounting concerns over stretched valuations. All three major U.S. stock indexes slid well into negative territory after the CEOs of Morgan Stanley and Goldman Sachs stoked fears of a potential market bubble, with the S&P 500 having climbed to a series of all-time highs, largely powered by the artificial intelligence boom.

The S&P 500 and the Nasdaq suffered their biggest one-day percentage drop since October 10.

CEOs of Morgan Stanley and Goldman Sachs caution

Tech shares weighed particularly heavily on the Nasdaq, with six of the “Magnificent Seven” AI-related momentum stocks losing ground on the day. The Philadelphia SE Semiconductor index dipped 4.0%

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