Stock market today: Live updates

Stock futures remained relatively stable Tuesday night following a record close by the Nasdaq Composite. Minor declines were seen in Dow Jones and S&P 500 futures, while Nasdaq 100 futures stayed nearly unchanged. American Airlines saw a significant drop after reducing its quarterly sales forecast, impacting other airlines. Despite some market sectors showing weakness, the overall stock market has made notable gains this month, with the Nasdaq significantly outperforming other indexes. Concerns remain about market valuations, with Morgan Stanley Wealth Management highlighting that stocks are "priced for perfection" amidst high uncertainties.

Market analysts have highlighted several potential risks and concerns regarding the stock market's rally and high valuations amidst economic uncertainties and upcoming events like the presidential election. These include:

1. Change in Tone from The Fed: A shift in the Federal Reserve's tone, similar to the one that occurred in the fourth quarter of 2018, could lead to a rapid decline in stock prices.
2. Higher Taxes: The markets have been ignoring potential tax hikes on businesses and individuals. A change to the capital gains rate could lead to pre-year-end profit-taking, and if a negative mood is present, any sell-off could be magnified.
3. More Regulations: The cost of new regulations isn't immediately felt, but eventually, they hurt profits and new investment.
4. Increased M&A Scrutiny: New White House guidance limiting mergers and acquisitions will have a higher bar for approval. This will narrow valuations.
5. Slow Growth in Europe and Japan: Aging populations in Europe and Japan are deflationary. Debt and structural inefficiencies continue to plague Europe. Japan's hoped-for Olympic boost didn't materialize. These regions were in slow growth mode before Covid, and little has happened in the past 18 months to change that.
6. High Valuations: The stock market run-up has created high market multiples with the forward price earnings ratio of the S&P 500 north of 22. While low rates and strong earnings growth can justify some of this, it is above its historical market average which makes stock prices vulnerable to a correction5.
7. Covid-Shutdowns: Whether it is fear of Covid or government-mandated shutdowns, the specter of Covid remains an obstacle to optimism.
8. A Shift in Sentiment and Algorithmic Trading: The machines and algorithms are powerful, and when the 'risk-off' sentiment returns, market moves could be accelerated.
9. Unknown Global Events: We've had relative stability around the globe which is unlikely to be a permanent condition. For example, the past few weeks saw a significant drop in Chinese stocks because of comments made by the Chinese regulators. This sharp and quick downturn is a small reminder of how billions in stock market value can be lost very quickly.

Despite these risks, the bullish case is that liquidity is massive and not going away. The Fed continues to focus more on employment than inflation. Congress will spend on infrastructure, earnings will grow (albeit at a slower rate than this recent quarter's historical performance), and innovation is improving productivity. Money has to go somewhere and with bond yields low, investors have little choice but to turn to stocks.