Early Rally Fizzles as Tech Stocks Lead Market Decline
Wall Street experienced a dramatic reversal on Thursday, surrendering early gains to close sharply lower as technology stocks, led by chipmaker Nvidia, gave up their initial post-earnings momentum. The major indexes all finished in negative territory, with the Nasdaq Composite bearing the brunt of the selling pressure.
The Dow Jones Industrial Average fell 272.72 points, or 0.59%, to 45,867.80, while the S&P 500 lost 73.63 points, or 1.10%, to 6,568.53. The technology-heavy Nasdaq Composite suffered the most significant decline, slipping 357.60 points, or 1.58%, to 22,206.63.
Nvidia's Volatile Session and Semiconductor Sector Weakness
Nvidia, the world's most valuable company, became the focal point of Thursday's trading session. After initially surging as much as 5% following stronger-than-expected earnings, the stock ultimately closed down 2.5%. The chipmaker had forecast sales above analysts' estimates for the fourth quarter and surpassed expectations for third-quarter revenue.
During an analyst call, Nvidia CEO Jensen Huang addressed concerns about artificial intelligence spending, stating, "We see something very different." Despite this confidence, the broader semiconductor sector struggled, with the Philadelphia SE Semiconductor index dropping 3.4%.
"I expected the market to be up today just based on the strength of Nvidia's earnings and the recent skepticism about AI investment," said Jed Ellerbroek, portfolio manager at Argent Capital Management in St. Louis. "Nvidia's earnings obviously dispelled a bunch of those fears. We've been in kind of a defensive type of trading action for the last two weeks, so it could be a continuation of that."
Mixed Jobs Data and Sector Performance
The market faced additional headwinds from conflicting labor market signals. September employment data showed employers added 119,000 jobs, significantly higher than the 50,000 estimate. However, the unemployment rate also increased, creating uncertainty about the Federal Reserve's next moves.
Traders are now pricing in an increasing chance of a Federal Reserve interest rate cut in December. The mixed economic signals contributed to a defensive rotation in the market, with consumer staples rising 1.1% to lead S&P 500 gainers while technology stocks declined the most.
Among individual stocks, Walmart advanced after the retailer raised its annual forecast for the second time this year and announced plans to move its stock listing from the NYSE to Nasdaq in December.
Market breadth reflected the negative sentiment, with declining issues outnumbering advancers by a 2.54-to-1 ratio on the NYSE. The exchange recorded 87 new highs and 210 new lows. On the Nasdaq, the ratio stood at 2.25-to-1, with 1,427 stocks rising and 3,209 falling.
The market's sharp reversal from early gains highlights ongoing investor concerns about technology valuations and the economic outlook, particularly regarding artificial intelligence investments and the timing of potential Federal Reserve policy changes.
