Azzad MarketWeek
Heightened volatility was on Wall Street’s mind last week, as investors continued to focus on valuations of artificial intelligence (AI) stocks.
The Standard & Poor’s 500 Index fell 1.95 percent, while the Nasdaq Composite Index declined 2.74 percent. The Dow Jones Industrial Average slid 1.91 percent.
AI Valuation Worries
Stocks slid over the first half of the week as anticipation continued to build for Q3 results from one of the largest AI megacap tech stocks, due out midweek.
While the decline was led by megacap tech stocks, which typically drag down both the Nasdaq and S&P 500, the Dow Industrials also fell. With the government still playing catch-up on a backlog of economic reports following the shutdown, investors kept a close eye on big consumer-related stocks for insights into the economy.
Then midweek, all three major averages rebounded, with the S&P snapping a four-day losing streak. Sentiment improved as investors turned more positive about another AI firm’s quarterly report due out after Wednesday’s closing bell.
That firm’s results helped boost stocks after the opening bell on Thursday, but prices retreated quickly as investor anxiety built over whether the Fed would adjust rates next month. The Fed’s October meeting minutes revealed divisions among the Committee’s voting members. Additionally, the Labor Department’s September jobs report painted a mixed employment picture, which might complicate the Fed’s decision.
Stocks rebounded on Friday after New York Fed President John Williams seemed to reassure investors that a rate adjustment at the Fed’s December meeting was still a possibility. The bounce was jagged, as the rebound had to battle through disappointing economic data on consumer sentiment and manufacturing activity.
Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost.
The forecasts or forward-looking statements are based on assumptions, may not materialize, and are subject to revision without notice.
The market indexes discussed are unmanaged and generally considered representative of their respective markets. Index performance is not indicative of the past performance of a particular investment. Indexes do not incur management fees, costs, and expenses. Individuals cannot directly invest in unmanaged indexes. Past performance does not guarantee future results.
The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 largest, publicly traded companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2,000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. The U.S. Dollar Index is a geometrically weighted index of the value of the U.S. dollar relative to six foreign currencies. Market indexes listed are unmanaged and are not available for direct investment.
Fixed income investments are subject to various risks including changes in interest rates, credit quality, inflation risk, market valuations, prepayments, corporate events, tax ramifications and other factors.
International investments carry additional risks, which include differences in financial reporting standards, currency exchange rates, political risks unique to a specific country, foreign taxes and regulations, and the potential for illiquid markets. These factors may result in greater share price volatility.
