Dow Jones Industrial Average grapples with fresh market concentration fears

• The Dow Jones eased lower on Tuesday, battling the 47,000 region.
• Equity markets showed their over-extended feathers as AI overvaluation fears loom.
• Private labor data due this week to take on added significance as official data remains dark.

The Dow Jones Industrial Average (DJIA) fell alongside its major index peers on Tuesday, shedding nearly 300 points from Monday's closing prices as investors pivoted into fresh concerns that the global AI tech craze may have left equity markets overly concentrated in key stocks with dubious revenue power.

Dow Jones faces fresh weakness after posting record highs last week

The Dow Jones fell to its lowest intraday prices in over a week, declining to 46,840 before finding a weak foothold near the 47,000 handle. With a mild pullback in AI tech stocks underway, the broader equity market is revealing some worrying red flags: Despite making thin gains on Monday, over 300 stocks listed on the Standard & Poor's 500 (S&P 500) index closed in the red for the day, with any gains entirely at the hands of deeply concentrated tech rally darlings. With the self-feeding AI rally taking a breather on Tuesday, a notable lack of "breadth" in equities is rearing its head.

Key financial market players, most notably the CEOs of Goldman Sachs (GS) and Morgan Stanley (MS), took turns cautioning that overextended markets could be due for a pullback, with both megabank chairs warning of possible broad-market drawdowns in the 10-20% range over the next year or two. The Dow Jones is currently down a little over 2% from record highs just north of 48,000, reached just last week.

Palantir may not be worth two centuries' worth of earnings after all

As a perfect example of the market's current lack of breadth, Palantir (PLTR) is down over 7% on Tuesday, declining sharply despite broadly beating Wall Street earnings expectations. Despite leaning heavily into the AI tech space and delivering plenty of headline-grabbing scratch for investors' AI integration itch, the company still remains well short of delivering meaningful revenue gains on its most-championed segments. Investors may be starting to have doubts about Palantir carrying a forward P/E ratio somewhere between 200 and 700, depending on how you smash the balance sheet numbers together.

With real data on ice, ADP jobs data to step up

ADP Employment Change figures for October are due on Wednesday. ADP numbers have a historically disastrous correlation to actual official datasets from one release to the next, but that is unlikely to stop investors from placing additional importance on the volatile month-to-month ADP figure while the ongoing US government shutdown shuts off the flow of more meaningful sample estimates such as the Nonfarm Payrolls (NFP) jobs report.

Dow Jones daily chart