The S&P 500 fluctuated significantly on Friday, erasing some of the early gain as major technology stocks, including NVIDIA Corp., came under fresh pressure.
Several megacap stocks, including NVIDIA and Oracle, contributed to the market's struggles as concerns about overstretched valuations emerged. NVIDIA's shares sank 4.3% to the lowest intraday price since September, while Oracle Corp. shares slid 8.1% as well, pacing declines among megacaps.
These changes reflected a deepening unease that the price surges linked to AI have become unsustainable, fueling fears of an AI bubble. Alphabet Inc. bucked the losers, rising 3.7% as investors took to its new Gemini AI model, announced Thursday.
The sentiment in the broader market was mixed, as investors watched Federal Reserve policies closely. The President of the Federal Reserve Bank of New York, John Williams, signaled rate cuts might still be possible in the near term, since labor markets have been showing softness. His comments helped to raise expectations of a possible December rate cut.
Speculation of rate cuts has been one of the key drivers of sentiment. However, a series of recent signs by other Federal Reserve officials hinted that the central bank might not touch its stance, which has kept investors guessing about the future course of interest rates.
A closely watched gauge of consumer confidence, the University of Michigan's consumer-sentiment index, fell in November to some of the lowest levels on record. The report said the decline stemmed from weaker views on personal finances.
Investor sentiment had already been extremely fragile. The US government shutdown delayed the release of consumer inflation data for October, adding to the uncertainty.
With NVIDIA leading the recent selloff, the technology sector has been especially unstable. The firm initially rose on a strong earnings report earlier in the week, but it was short-lived as concerns about its high valuation resurfaced.
Investors are now beginning to question whether the massive rally in AI-related stocks can continue or whether the market is setting itself up for a significant correction. The sharp declines in stocks like Oracle and NVIDIA also represent a market correction after an extended period of strong growth driven by AI optimism.
Despite struggles in the technology sector, some companies, such as Eli Lilly & Co., have fared well. Eli Lilly’s stocks surged past the $1 trillion market cap milestone, making it the first healthcare name to join this elite club. Pharmaceutical firm Eli Lilly has benefited from investor confidence in its weight-loss drugs, underscoring ongoing diversity in the performance of various sectors in the S&P 500.
US Treasury yields have remained largely stable, with the 10-year Treasuries holding firm at 4.08%. The bond market was boosted earlier in the day following comments from Williams on potential rate cuts.
Bitcoin, which outperformed earlier in the year, is slumping in what could be its worst month since 2022, falling close to $84,000. This steep plunge in the price of Bitcoin is adding to the overall sense of uncertainty in the market. The stock market is highly volatile, with many traders waiting for further guidance from the Federal Reserve and key economic reports set for December.
Also Read: US Stock Market Today: NVIDIA's Results Ease AI Bubble Concerns, Jobs Data Shows Growth