U.S. stocks finished mixed Friday, with the Nasdaq snapping a three-day losing streak as tech heavyweights like Nvidia, Tesla, and Oracle regained ground. Market sentiment remained cautious amid inflation worries and Fed uncertainty.
The Nasdaq Composite rebounded on Friday, snapping a three-day losing streak as investors bought back shares of major technology companies that had led Wall Street’s steepest sell-off in over a month.
The tech-heavy Nasdaq rose 0.13% to close at 22,900.59, while the S&P 500 edged down 0.05% to 6,734.11. The Dow Jones Industrial Average fell 309.74 points, or 0.65%, ending at 47,147.48.
Despite the modest finish, all three major indexes recovered sharply from intraday lows that saw the Nasdaq down nearly 1.9% and the Dow off almost 600 points.
After a volatile week, the Nasdaq closed 0.5% lower for the period, while the S&P 500 and Dow managed weekly gains of 0.1% and 0.3%, respectively.
Tech names that bore the brunt of Thursday’s sell-off staged a mild comeback. Artificial intelligence bellwethers Nvidia, Oracle, Palantir Technologies, and Tesla all reversed part of their losses from the prior session, when each dropped over 6%.
The Technology Select Sector SPDR Fund (XLK) gained 0.5%, recovering some of its 2% decline from Thursday.
Still, traders say the rebound reflects short-term positioning rather than renewed conviction in high-growth tech.
“We’re switching back and forth between risk-on and risk-off,” said Brian Mulberry, portfolio manager at Zacks Investment Management. “Investors are repositioning into year-end, especially given how concentrated performance has been among a handful of large-cap tech names.”
Mulberry added that the market is likely to remain volatile but range-bound, expecting more 1–2% swings “as people de-risk and rebalance portfolios heading into 2026.”
The AI boom that has fueled much of 2025’s market rally is now showing cracks.
Investors have grown uneasy about stretched valuations and the sustainability of massive AI-related spending, particularly after the sell-off in cloud provider Oracle, whose stock has shed more than 15% this month.
Analysts note that Oracle’s heavy dependence on its cloud deal with OpenAI has heightened investor sensitivity, especially since the company lacks the cash reserves of larger hyperscalers like Microsoft or Amazon.
“AI is truly testing the limits of Wall Street spreadsheets right now,” said David Krakauer, vice president at Mercer Advisors. “Investors are pricing in so much future growth they can’t yet measure, which breeds volatility. Any small shift in profit or rate expectations has an outsized effect.”
The AI sector’s high valuation multiples—with some trading at 40–50 times forward earnings—leave them vulnerable to even minor changes in interest rate outlooks or profit guidance.
Concerns about the Federal Reserve’s next move added to market tension.
According to the CME FedWatch Tool, traders now assign less than a 50% chance of a December rate cut, down from 63% earlier this week and 95% a month ago.
Investors have been hoping for another cut to stimulate growth and encourage risk-taking, but some Fed officials have signaled discomfort with inflation that remains “too sticky” to justify further easing.
The Fed’s December 9–10 meeting now looms as a critical test of investor sentiment.
“Every statement from the Fed carries more weight now,” said Liz Ann Sonders, chief investment strategist at Charles Schwab. “Markets are hypersensitive to signals that could confirm or deny another rate cut.”
Higher yields have put renewed pressure on growth stocks, especially those in the AI and semiconductor sectors, which rely on low-rate environments to justify elevated valuations.
Markets were also digesting the end of the record 43-day U.S. government shutdown, which concluded Wednesday evening.
While the reopening was expected to restore the flow of economic data, the White House warned that some key reports—particularly October labor and inflation data—may never be released due to administrative backlogs.
The lack of fresh data has left traders “flying blind,” complicating the Fed’s task and adding uncertainty to market positioning.
Economists caution that incomplete data could skew both inflation forecasts and the Fed’s decision-making process.
“Without reliable data, monetary policy risks overreacting to partial signals,” said a note from JPMorgan strategists. “This adds another layer of volatility to already fragile sentiment.”
Friday’s modest rebound offered some relief after a bruising week on Wall Street, but analysts warn the market remains on shaky ground.
The tug-of-war between AI optimism and valuation fears, combined with uncertainty over the Fed’s next move, continues to define investor psychology.
While the Nasdaq’s recovery may mark a short-term floor, traders expect continued volatility heading into the year’s final weeks.
1. Why did the Nasdaq rebound on Friday?
→ Investors bought back major tech stocks such as Nvidia, Tesla, and Oracle after a steep sell-off, helping the index recover from earlier losses.
2. What is driving volatility in the market?
→ Concerns over the Fed’s interest rate policy, high AI stock valuations, and lingering inflation worries have kept investors cautious.
3. How likely is a Fed rate cut in December?
→ The CME FedWatch Tool shows less than a 50% chance of a quarter-point cut, down sharply from 95% odds just a month ago.
4. What impact did the government shutdown have on markets?
→ The shutdown delayed or possibly eliminated key economic reports, leaving investors without data to guide expectations for growth and inflation.
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