Why markets are suddenly on edge
For months, it seemed like nothing could stop stocks from rising steadily, but November turned out to be a tough month for Wall Street.
The tech-heavy Nasdaq Composite is down nearly 4% this month, heading for its first losing month since March. Nasdaq’s market value fell by nearly $2 trillion in two weeks as investors dumped technology stocks.
Stocks fell on Friday but bounced off their lows as investors bought the dip: The Nasdaq fell 0.15% after briefly falling more than 1.6%. The S&P 500 fell 0.3 percent. The Dow fell 390 points, or 0.82%. Wall Street’s fear gauge VIX rose 10 percent.
The benchmark S&P 500 is down almost 2% this month, while the Dow is down 1.2%. The S&P 500 has lost more than $1.3 trillion in market value in more than two weeks as it retreats from the record high it set in late October.
After months of gains, it has exceeded investors’ expectations, making it easy to disappoint them. Technology stocks formed relatively expensive.
After the government shutdown halted official data releases for weeks, investors are unsure what new figures will show about the state of the world’s largest economy as the government resumes its release. This increases uncertainty about whether the Fed will continue to cut interest rates in December and increases tensions on Wall Street.
“With the government shutdown, we could believe anything we wanted to believe,” Ed Yardeni, president of Yardeni Research, told CNN’s Matt Egan. “We now have to depend on data, and that might not be that fun.”
The enthusiasm for artificial intelligence has pushed the market to new records this year. But now some investors are taking a break, taking profits and re-evaluating whether these stocks will continue to deliver superior returns.
“With high valuations in AI-related stocks, it is understandable that investors are nervous about anything that could go wrong,” Yardeni wrote in a note Thursday.
Bitcoin, which could be an indicator of how risky investors are feeling, lost 5% on Friday and hovered around $95,000. The cryptocurrency has lost almost 25% of its value since hitting a record high in early October.
Wall Street and the Fed are awaiting the influx of economic data delayed by the shutdown.
This is contributing to growing nerves about the Fed’s next move. Traders on Friday were pricing the odds of the central bank cutting interest rates in December at 53%, down from 96% a month ago.
At the last policy meeting in October, Fed Chairman Jerome Powell expressed doubts about whether the Fed would cut interest rates again this year. Fed officials, including Boston Fed President Susan Collins, who will vote on policy moves this year, made statements this week that showed their hesitancy to continue interest rate cuts.
