According to Fortune, the S&P 500 erased an early 1.3% drop to finish up 0.4% on Friday, while the Nasdaq composite flipped from negative to a 0.6% gain. Nvidia, the AI poster child that began the day down 3.4%, stormed back to a 2% rise and dragged the broader market with it. The Dow Jones Industrial Average trimmed its loss from nearly 600 points down to just 163 points. Meanwhile, Walmart fell 0.2% after CEO Doug McMillon’s surprise retirement announcement, having been down as much as 3.6% earlier. Bitcoin briefly fell below $95,000, back to May levels, while gold sank 2.4% as Treasury yields rose to 4.15%.
The everything-earnings report
Here’s the thing about Nvidia right now – it’s basically become the entire market’s mood ring. When this stock sneezes, the S&P 500 catches a cold. Or in Friday’s case, when it rallies, everything else follows. The company reports earnings this Wednesday, and the stakes couldn’t be higher. We’re talking about a stock that’s more than doubled in four of the last five years and is still up 42% for 2024 alone.
Think about that pressure. Nvidia has to deliver not just good numbers, but spectacular numbers to justify these valuations. If they miss expectations, we could be looking at a serious market correction. And given that Nvidia is now the largest stock by value on Wall Street, its movements have an outsized impact on the broader indexes that dictate your 401(k) performance.
The Fed’s waiting game
Meanwhile, the Federal Reserve is playing a different kind of waiting game. They’ve cut rates twice already this year, but now there’s real uncertainty about whether we’ll get that third cut in December. The government shutdown complicated things by delaying economic data, leaving Fed officials in the dark about what’s actually happening with jobs and inflation.
This interest rate uncertainty matters because lower rates make stock prices look more reasonable. When bonds pay less interest, investors are willing to accept lower returns from stocks too. But with inflation stubbornly above the Fed’s 2% target, there’s only so much cutting they can do. It’s a delicate balancing act that’s making everyone on Wall Street antsy.
Beyond the AI frenzy
While all eyes are on Nvidia and AI stocks, there’s plenty happening elsewhere. Walmart’s CEO retirement news shook the retail giant temporarily, though it recovered most of its losses. Overseas markets weren’t so lucky – South Korea’s Kospi fell 3.8% in one of the world’s worst performances.
Even bitcoin and gold, traditional hedges against market volatility, took hits. Bitcoin falling back to $95,000 shows that even crypto isn’t immune to broader market sentiment. And gold’s 2.4% drop suggests investors might be rethinking their inflation protection strategies.
So what happens now?
Brian Jacobsen from Annex Wealth Management probably put it best: “Occasional market drops are the price of the ticket for the ride.” After the massive run we’ve seen since April, some volatility was practically inevitable. The question is whether this is just a bump in the road or the start of something bigger.
Everything really comes down to Wednesday. Nvidia’s earnings will either validate the AI hype or expose it as overblown. Given how much of the market’s recent gains are tied to artificial intelligence enthusiasm, we could be looking at a make-or-break moment for the current bull market. Buckle up – it’s going to be an interesting week.
