Stocks experienced a notable surge in a shortened trading session on Friday, bringing the S&P 500 index close to its record high. The index rose by 36 points, or 0.5%, finishing at 6,849, just 42 points shy of its peak recorded on October 28. The Dow Jones Industrial Average saw a solid increase of 289 points, up 0.6%, to close at 47,716. The Nasdaq Composite, while up 0.7% on Friday, ended the month with a 1.5% decline, heavily impacted by losses in several large technology stocks.
The rally over the past five days has allowed the S&P 500 to recover nearly all of its earlier losses this month, which had been driven by concerns regarding a potential bubble within the artificial intelligence and technology sectors. Notably, AI chipmaker Nvidia experienced a decline of 1.8% on Friday, concluding November with significant losses in excess of 10%. Other notable drops included Oracle, which tumbled by 23%, and Palantir Technologies, sinking 16%. Chris Larkin, Managing Director of trading and investing at E*TRADE from Morgan Stanley, noted that while the market needs to demonstrate its ability to maintain this upward momentum, the recent weakness following Nvidia’s earnings may represent a short-term selling climax rather than an indication of lingering bearish sentiment.
Investor apprehensions about an AI bubble have intensified, particularly as stocks may have risen based on inflated growth expectations that differ from their underlying performance. Despite these concerns, some tech companies reported gains, with Alphabet rising nearly 14% due to positive sentiment surrounding its latest Gemini AI model. The recent market turnaround has been fueled by optimistic expectations that the Federal Reserve may cut interest rates during its upcoming meeting next month. Analysts indicate a nearly 87% probability that the Fed will lower rates when it convenes on December 10.
The central bank faces tough choices regarding interest rates amid rising inflation and a slowing job market. Further cuts could bolster the economy as employment figures weaken, yet they risk exacerbating inflation. The latest corporate earnings reports have been largely favorable, though economic data presents a mixed picture. Minutes from the Fed’s recent meeting revealed potential divisions among policymakers about subsequent monetary policy steps.
Retail stocks are also in focus as the market observes consumer behavior during the annual Black Friday sales. Macy’s shares dipped 0.3%, while Kohl’s climbed by 1.4%. Dick’s Sporting Goods fell 0.5%, contrasted by gains in specialty retailers like Abercrombie & Fitch, which rose 2.9%, and American Eagle Outfitters, gaining 0.7%. Amid the volatility surrounding tech stocks, many traders are reallocating their investments to more stable sectors. Notably, pharmaceutical companies like Eli Lilly and Merck both posted gains exceeding 20% for the month, alongside some travel-related companies, such as Marriott and Expedia, which also saw solid monthly increases.
Earlier in the session, futures for the Dow Jones Industrial Average, S&P 500, and Nasdaq experienced delays due to a technical malfunction at the Chicago Mercantile Exchange, tied to an outage at a data center. Treasury yields saw a slight uptick, with the 10-year yield stabilizing at 4.02%.
