Stocks Reverse Course with S&P 500 down 1.56%
Stocks are retreating Friday after an early morning surge on Thursday, cutting off a new tech rally at the foot.
Quick overview
- The stock market initially rose after Nvidia reported strong earnings, but gains quickly faded by the end of the day.
- The Dow Jones fell 0.84%, while the S&P 500 and Nasdaq Composite dropped 1.56% and 2.15%, respectively, as technology stocks retreated.
- Concerns about a potential bubble in the market are resurfacing, especially as even Nvidia's stock declined despite its excellent earnings report.
- Ray Dalio suggests that while there is a bubble, it is not yet ready to burst, advising investors to continue buying.
The stock market rose on Thursday as Nvidia reported excellent earnings for the quarter, but those gains quickly deteriorated as stock indices tumbled by the end of the day.
The Dow Jones fell 0.84%, becoming the stock index least affected by Thursday’s market turnaround. The S&P 500 dropped 1.56% and the Nasdaq Composite fell 2.15% as technology stocks retreated.
What looked like a turning point for the market this week when Nvidia (NVDA) released its quarterly earnings quickly became another downturn. Even Nvidia was not left unfazed, and that AI stock fell 3.15% on Thursday by the end of trading.
Technology Stocks Are in Trouble
The stock market has been erratic throughout November. Coming off of October highs, including all-time highs for many stocks and several cryptocurrencies, the stock market has trended mostly bullish through November. There have been small upswings periodically, but for the most part, November has been wildly disappointing for investors.
The idea that a bubble is forming and that stocks are in a risky place is being floated once more. Thursday’s early morning performance was promising, but the retreat that the stock market is doing should have investors wondering if the current market numbers are sustainable.
Friday’s early morning drop shows that they might not be. Advanced Micro Devices (AMD) is down nearly 8% for Friday and is indicative of a wider trend among technology stocks and AI stocks. The company posted decent earnings early this month which showed growth but that resulted in the stock price falling.
There is simply too much fear surrounding AI stocks right now for AI stocks to perform consistently well, and Nvidia’s decline this week only adds to that, especially on the back of Nvidia’s excellent earnings statement. If even the company with the highest market cap cannot enjoy increasing stock values after posting excellent quarterly earnings, where does that leave smaller companies?
The founder of hedge-fund company Bridgewater Associates, Ray Dalio, said this week that there is a bubble in the market right now, yet he still believes investors should be buying. According to Dalio, the current state of the market is not at a point where the bubble is going to burst. Comparing the market now with where it was in the ‘90s when the bubble burst, he says the assessment shows that the bubble is not ready to burst, estimating that it is about 80% of the way there.
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