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Stock market today: AI bubble fears, rate cut probability whipsaw tech giants
Thursday, November 20, delivered a masterclass in market volatility for the tech sector, a dramatic session that began with a surge of optimism only to be undercut by deep-seated anxieties over artificial intelligence valuations and the Federal Reserve's interest rate intentions. The day's narrative was initially dominated by Nvidia’s stellar earnings report, released after Wednesday’s closing bell, which sent its shares soaring nearly 5% in early trading.The chipmaking behemoth, a primary engine of the AI boom, reported third-quarter revenue of $57. 01 billion and an adjusted EPS of $1.30, handily surpassing Wall Street's already lofty expectations. More crucially, its forward guidance of $65 billion in fourth-quarter revenue—a figure that eclipsed the $62 billion analyst consensus—signaled unrelenting demand for its processors, the very bedrock of the generative AI infrastructure.This bullish data acted as a rising tide, lifting the other members of the so-called 'Magnificent Seven'—Alphabet, Amazon, Apple, Meta, Microsoft, and Tesla—in a synchronized upward climb, suggesting a collective sigh of relief from investors. However, the euphoria proved fleeting.As the trading day progressed, a familiar specter re-emerged: the gnawing fear that the breakneck rally in AI-centric stocks has created a speculative bubble detached from underlying economic realities. Compounding this sector-specific worry was a recalibration of expectations for monetary policy.Earlier in the week, a string of resilient economic data had led the market to significantly dial back the probability of a Fed rate cut in the coming month, a prospect that weighs heavily on growth-oriented tech stocks whose valuations are heavily dependent on future earnings discounted by prevailing interest rates. The confluence of these two forces—AI bubble fears and a 'higher-for-longer' rate narrative—triggered a sharp reversal.By the close, the tech-heavy Nasdaq Composite had whipsawed to finish at $22,078. 05, and each of the Magnificent Seven had surrendered their morning gains, with Nvidia itself giving back its impressive advance.The drama, however, was far from over. In an overnight twist that exemplifies the current market schizophrenia, hopes for a rate cut were suddenly revived.Data from the CME Group's FedWatch Tool on Friday morning indicated a dramatic swing, pricing in a 70. 9% likelihood of a cut, a stark reversal from the previous day's pessimism.This sent pre-market activity into another frenzy, with the Nasdaq looking poised to open at a 10-week low before pivoting positive as the opening bell neared. The individual stock movements told the story of a market grappling with conflicting signals: Alphabet clawed back 3.36% in early Friday trading, while Amazon and Microsoft remained flat. Apple and Meta saw modest gains of 0.8% and 0. 88% respectively, and Tesla jumped 1.79%. Tellingly, Nvidia, the previous day's hero, found itself down 1.62%, a clear sign that even blockbuster fundamentals are not immune to broader macroeconomic and sentiment shifts. This volatility is not occurring in a vacuum.The tech sector has been under pressure for weeks as a sobering reassessment of AI's near-term profitability takes hold. The long-delayed September jobs report, released yesterday, added another layer of complexity, showing a robust addition of 119,000 new positions—far above the 50,000 predicted—yet paired with an unexpected rise in the unemployment rate to 4.4%. This mixed bag provides ample fodder for both hawkish and dovish interpretations from the Fed, ensuring that the market's rollercoaster ride, driven by the fragile interplay between technological hype and monetary policy, is likely far from over.
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#Nvidia
#Magnificent Seven
#stock market
#AI bubble
#Federal Reserve
#rate cuts
#earnings
#volatility
