Stocks turn choppy as investors asses momentum behind AI

Wall Street rebounded on Friday, with gains from Nvidia and other technology companies helping pare earlier losses.

After dropping 1.3% early in the session, the S&P 500 erased its losses and rose 15 points, or 0.2%, in afternoon trading. The Nasdaq Composite index also recovered from a morning dip to gain 101 points, or 0.4%, while the Dow Jones Industrial Average trimmed its losses on the day to 196 points, or 0.4%, after earlier shedding 600 points.

Stocks were buoyed by gains from Nvidia, the world’s leading chipmaker, which was up more than 1% in afternoon trading. Nvidia is set to report profits on Nov. 19. 

“We believe Nvidia’s earnings next week will be another major validation moment for the AI Revolution and be a positive catalyst for tech stocks into year-end, as investors continue to underestimate the scale and scope of AI spend,” Wedbush analyst Dan Ives said in a report.

Tesla shares also made a comeback from losses yesterday, rising 1.4%.

If it falls short of analysts’ expectations, more drops could be on the way. That would have a huge effect on the market because Nvidia has grown to become Wall Street’s largest stock by value and briefly topped $5 trillion. That gives Nvidia’s stock movements a bigger effect on the S&P 500 than any other’s, and i

The gains came after the stock market had one of its worst days on Thursday since April.

In a note to investors, analyst Adam Crisafulli of Vital Knowledge said on Friday that investor concerns about the strength of AI company stocks have flared this week, while noting that growth in the sector remains solid.

“There’s a lot of emotion involved with AI, and people are getting spooked by the sloppy price action in prominent AI-linked stocks, but actual fundamentals in the industry remain very strong,” he said.

Stocks have also cooled because investors are less confident about another Federal Reserve interest rate cut when the central bank meets for the final time this year on Dec. 9-10. 

Reset “overdue”

The Fed lowered rates in September and October, but some policymakers have signaled their hesitation about cutting rates in December. Fed Chair Jerome Powell said last month that another cut isn’t “a foregone conclusion.”

Investors put the likelihood of a Fed rate cut in December at 53%, according to CME FedWatch.

The market reset this week was overdue, Mark Luschini, chief investment strategist at Janney Montgomery Scott, told CBS News, noting that stocks have risen steadily this year and only recently were trading at lofty prices. 

“We have not had as much as a 5% correction off the early April lows after about a 43% move in the S&P 500,” Luschini said.