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Financial Markets 11/14 15:27
NEW YORK (AP) -- An early swoon shook the U.S. stock market on Friday, as
Nvidia, bitcoin, gold and other high flyers swung on an increasingly antsy Wall
Street, but it quickly calmed.
After starting the day with a sharp drop of 1.3%, the S&P 500 erased all of
it and then meandered up and down before finishing with a slight dip of 0.1%.
The Nasdaq composite flipped to a gain of 0.1%, while the Dow Jones Industrial
Average trimmed its loss to 309 points, or 0.7%, after earlier being down
nearly 600.
AI stocks were again at the center of the action, a day after dragging Wall
Street to one of its worst drops since its springtime sell-off. Nvidia, which
has become the poster child of the frenzy around artificial-intelligence
technology, began the day with a loss of 3.4%. It then stormed back to a rise
of 1.8% and yanked the market in its wake.
Critics have been warning that the U.S. stock market could be primed for a
drop because of how high prices have shot since April, leaving them looking too
expensive. They pointed in particular to stocks swept up in the AI mania.
Nvidia's stock has more than doubled in four of the last five years, for
example, and the chip company is still up more than 40% for this year so far.
Even with sharp swings for the S&P 500 the last couple of weeks, the index
that dictates the movements for many 401(k) accounts remains within 2.3% of its
record set late last month.
"Occasional market drops are the price of the ticket for the ride," said
Brian Jacobsen, chief economist at Annex Wealth Management.
Outside of tech, Walmart edged down 0.1% after saying CEO Doug McMillon will
retire in January in a surprise move. It had been down as much as 3.6% in the
morning. McMillon helped the retailer embrace technology more.
All told, the S&P 500 fell 3.38 points to 6,734.11. The Dow Jones Industrial
Average dropped 309.74 to 47,147.48, and the Nasdaq composite rose 30.23 to
22,900.59.
One way companies can tamp down criticism about too-high stock prices is to
deliver solid growth in profits. That's raising the stakes for Nvidia's profit
report coming Wednesday, when it will say how much it earned during the summer.
If it falls short of analysts' expectations, more drops could be on the way.
That would have a big effect on the market because Nvidia has grown to become
Wall Street's largest stock by value. That gives Nvidia's stock movements a
bigger effect on the S&P 500 than any other's, and it can almost
single-handedly steer the index's direction on any given day.
Another way for stock prices broadly to look less expensive is if interest
rates fall. That's because bonds paying less in interest can make investors
willing to pay higher prices for stocks and other kinds of investments.
Treasury yields had been falling for most of this year on expectations that
the Federal Reserve would cut its main interest rate several times. And the Fed
has indeed cut twice already in hopes of shoring up the slowing job market.
But questions are rising about whether a third cut will actually come after
the Fed's next meeting in December, something that traders had earlier seen as
very likely. The downside of lower interest rates is that they can make
inflation worse, and inflation has stubbornly remained above the Fed's 2%
target.
Fed officials have pointed to the U.S. government's shutdown, which delayed
the release of updates on the job market and other signals about the economy.
With less information and less certainty about how things are going, some Fed
officials have suggested it may be better just to wait in December to get more
clarity.
In the bond market, the yield on the 10-year Treasury rose to 4.14% from
4.11% late Thursday.
Bitcoin is one of the investments that can get a boost from lower interest
rates. It fell below $95,000, back to where it was in May. It had been near
$125,000 only in October.
The price of gold, meanwhile, sank 2.4%. It shot to records throughout the
year as investors looked for something that could protect from high inflation
and big debt loads built by the U.S. and other governments worldwide. But
interest rates staying higher can hurt gold, which pays its investors nothing
in interest or dividends.
In stock markets abroad, indexes dropped across Europe and Asia. South
Korea's Kospi fell 3.8% for one of the world's largest losses.
London's FTSE 100 sank 1.1% amid speculation the U.K. government may ditch
plans to raise income taxes, which would have helped chip away at its debt.
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AP Writer Teresa Cerojano contributed.
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