Wall Street's Week: AI Selloff, Strong Jobs and a Fed Rate Debate
The Nasdaq fell 3.4% for the week and the S&P 500 lost 2.7% despite a Friday rebound, as investors weighed jobs data, AI valuations and next week's CPI.
U.S. stocks ended a volatile week lower on Friday, November 6, after a Thursday selloff in AI-linked shares was followed by a partial rebound and a jobs report strong enough to push traders toward a Federal Reserve rate hike in December. For the week, the Nasdaq Composite fell 3.4%, the S&P 500 fell 2.7% and the Dow Jones Industrial Average fell 0.9%, according to a Saturday market brief citing CNBC data.
On Friday the Nasdaq Composite rose 1.09% to 24,579.42 and the S&P 500 rose 0.31% to 7,376.86. The Dow fell 0.46% to 51,285.73. The next scheduled test is the October consumer price report on Tuesday, November 10, at 8:30 a.m. Eastern time.
These developments should not be treated as a single signal. Stock indexes measure changing market valuations, the payroll survey measures employment, and futures-derived interest-rate probabilities summarize traders' positions. A stronger jobs report may lift bond yields while also easing concern about economic weakness. That is why Friday's equity rebound did not erase the week's declines.
Weekly market summaries also need to separate an index's daily change from its five-session performance. The Nasdaq's Friday gain came after a much larger Thursday loss, leaving it down on the week. The same distinction applies to the S&P 500. The next CPI release may change policy expectations again; today's probabilities should not be read as a commitment by the Federal Reserve.
The rout and the rebound
Thursday's selloff was concentrated in technology. The Nasdaq Composite fell 5.5% and the S&P 500 fell about 4.4%, according to Fox Business, as investors weighed whether a Democratic-controlled Congress would slow AI development and whether heavy AI spending would produce enough returns. Estimates of the value lost vary by source. One summary put the damage at about $3 trillion, while another, citing CNBC, put the Nasdaq 100 loss at $2.3 trillion. The measures differ, and neither has been confirmed against exchange data.
Friday brought a partial recovery. AMD rose 11% and Nvidia added 2.8%, and the Philadelphia semiconductor index gained 4.2%. The rebound recovered only part of the previous day's drop. Reuters reported that equities in Europe and Asia extended their slide on Friday, while Wall Street futures pointed to a modest Nasdaq bounce before the open.
The VIX, a gauge of expected volatility in the S&P 500, fell 9% on Friday to 25.64, which is still elevated by recent standards.
Jobs report shifts the rate debate
The Labor Department reported that employers added 165,000 jobs in October against a much lower consensus estimate. The unemployment rate fell to 4.1% from 4.2%, and average hourly earnings rose 0.4%, according to AP and Reuters.
Markets responded by raising the probability of a quarter-point rate hike at the Fed's December 8 and 9 meeting. Barchart put the odds at 78%, and CME FedWatch data cited by Scotsman Guide showed about 80%, up from 67% the previous day. The Fed raised rates in September to a range of 3.75% to 4.00% and held them in October, with two officials voting for another increase, according to FinanceFeeds.
The 10-year Treasury yield rose to about 4.87% and the dollar index rose 0.7% to about 102.3. The euro fell 0.67% to $1.1143.
Wage growth tempers the picture. Annual earnings growth of 3.1% trails consumer price inflation of 3.7% in the year to September, which means real pay is still falling, and AP noted that a wage-driven inflation spiral does not appear to be underway.
Oil falls and energy leads the decline
Energy was the worst-performing sector in the S&P 500, down about 12% for the week, according to the market brief. West Texas Intermediate settled at $90.83 a barrel on Friday, up 31 cents on the day but down nearly 13% on the week. Brent fell more than 16% to $98.32.
Consumers are focused on costs
The University of Michigan's preliminary November consumer sentiment index rose to 51.0. Survey director Joanne Hsu said worries about an AI bubble were "dwarfed by cost of living concerns." That is relevant because AI-related investment and consumer spending drove third-quarter GDP growth of 3.4%, AP reported. The two engines of growth are now pulling in different directions, with technology stocks falling and households still under price pressure.
What to watch
The CPI report is the first event. The September report showed headline prices up 3.7% from a year earlier and core prices up 2.6%, above forecasts, according to Scotsman Guide. A consensus forecast for the October numbers was not available in the sources reviewed. A reading at or above expectations would support the hike case, and a softer one would weaken it.
Limits of the data
The index closes and weekly changes in this article come from a Saturday market brief that cites CNBC, Reuters and Barchart, and they should be verified against exchange data before any trading decision. Fed hike probabilities are market pricing, not Fed forecasts, and they changed by about 13 percentage points in a day. Futures reopen Sunday evening, and levels will change.