U.S. stocks played tug of war on Friday, as broader markets tried to make a rebound while the Dow slipped. The Dow Jones Industrial Average (^DJI) dropped about 0.5%, while the S&P 500 (^GSPC) rose roughly 0.3%, and the Nasdaq Composite (^IXIC) gained about 0.5%.
The rebound followed a steep previous session, as investors dealt with slimming odds of a December rate cut by the Federal Reserve and renewed concern over high-flying tech stocks. Many traders said the market is flipping into a more skeptical mode: the hope of further policy easing is being replaced by caution over valuation and growth momentum.
Market Movers:
- Tesla Inc. (TSLA) – down ~-6%: Tesla remains under pressure, weighed down by weak EV delivery headlines and a slide below the $400 support mark. The stock’s reversal is seen as emblematic of the broader tech rotation in progress.
- Nvidia Corporation (NVDA) – up ~+1%: Nvidia bounced back after earlier losses as investors took advantage of the dip ahead of its upcoming earnings. The recovery, though modest, signals that confidence may be returning to chip/AI names, if only cautiously.
- Cisco Systems, Inc. (CSCO) – up ~+4%: The networking giant outperformed after delivering better-than-expected results, especially from hyperscale-AI infrastructure demand, and raised its full-year outlook, earning a rotation into more “reasonable” tech names.
- Disney (DIS) – down ~-9%: Disney’s sharp drop followed disappointing streaming growth and higher content costs, dimming hopes for near-term margin expansion in media and entertainment.
- Arm Holdings plc (ARM) – down ~-5%: Though still viewed as a key player in AI infrastructure, ARM saw profit-taking after a recent surge and the broader semiconductor pull-back amid rate-cut uncertainty.
Rate-Cut Hopes Fade, Tech Valuations Under Strain
The surprising resilience of the U.S. economy, coupled with hawkish commentary from several Fed officials, has lowered overall confidence in an imminent rate cut. Traders now see less than a 50% chance of a quarter-point reduction in December, down sharply from the near-certainty priced just weeks ago.
At the same time, tech stocks — many of which were powered by AI exuberance and lofty growth assumptions — are under scrutiny. As one strategist put it: “The worry is that you’re seeing memories of late-90s tech bubbles in how quickly valuations moved.” With data gaps caused by the recent government shutdown, investors are left making policy bets without full visibility into inflation and employment trends.
Rotation Gains Traction as Risk Appetite Drops
With tech under pressure, market flows have shifted somewhat toward value and defensive sectors such as industrials, healthcare, and infrastructure. Investors appear more willing to buy names with visible earnings and capital discipline rather than leaning on speculative growth stories.
The reopening of the government after a multi-week shutdown brought relief, but also highlighted critical data weaknesses — several inflation and labor-market releases may never be published due to the disruption. This uncertainty acts like extra drag on the market’s upside, even as liquidity conditions ease.
Looking Ahead
In the coming days, the market will key off several important signals: major earnings reports from tech and industrial companies, commentary from Fed officials on policy direction, and any signs that delayed economic data will resume. Until the clarity returns, expect the market mood to stay cautious. A firm break above support in key growth stocks or a revival in rate-cut odds could light up a more sustained rally, but until then, the prevailing theme is recalibration rather than runaway upside.
