The Dow Jones Industrial Average gained 493.15 points, or 1.08%, ending the week at 46,245.41, while the S&P 500 ended 0.98% higher at 6,602.99, and the Nasdaq Composite moved up 0.88% to settle at 22,273.08. This rebound followed a steep market sell-off earlier in the week. Upside activity was triggered by comments from New York Federal Reserve President John Williams, suggesting the central bank might cut interest rates again this year. His comments raised traders’ expectations for a December rate cut, causing futures to price in a more than 70% chance of a quarter percentage point cut. Stocks benefiting from lower rates, including Home Depot, Starbucks, and McDonald’s, led the market rally.
However, despite Friday’s rebound, all three major averages posted significant losses for the week. The S&P 500 concluded 2% lower week to date, as did the Dow, while the Nasdaq Composite suffered a 2.7% losing streak.
Notable losers were the tech stocks, primarily Nvidia, which saw an initial rally after a strong third-quarter earning report but ultimately took a hit with a more than 3% decline. Bitcoin also fell over 2%, contributing to the weak market sentiment. The AI market, in general, faced concerns over a possible overvaluation bubble after Nvidia’s bulky earnings report.
On the upside, the consumer sector showed promise with potential earnings reports from Walmart and Target.
U.S. stocks are headed into Thanksgiving week with uncertainty, following volatile trading attributed to concerns about AI investment and potential Fed rate cuts. Nvidia, an AI bellwether, had surged after strong earnings, reviving hope for the AI trade. Despite this, a significant pullback on Thursday triggered concerns that investor sentiments were shifting.
At the end of the week, the Dow Jones Industrial Average had dropped by approximately 1.3%, the S&P 500 was off 1.2%, and the tech-heavy Nasdaq Composite suffered the steepest loss, falling 1.8%. The likelihood of the Federal Reserve lowering rates by a quarter-point at its next meeting in December was at almost 75%, up from 39% on Thursday and about 44% a week ago.
Tech stocks experienced a significant slump this week, particularly those within the AI sector. Despite Nvidia posting strong earnings, it was not enough to halt the ongoing tech sell-off. Additionally, the ongoing concerns about the vast expenditure on AI by tech giants fed into multiday declines. Uncertainty grew as companies like Amazon increased their borrowing to fund AI objectives just as the Federal Reserve might halt interest rate cuts.
However, despite the pullback, some experts argue tech stocks—primarily those within the AI realm—should be bought given that this is still early in the AI growth cycle. They believe this cycle could last up to ten years.
In terms of specific market players, stocks that experienced lows this week included Nvidia, Broadcom, Palantir, Oracle, and Vistra, indicating AI sentiment remains low. On the other hand, Nvidia’s strong earnings, despite not befitting stock prices as expected, indicate the potential for future growth within the sector.
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