Stock market today: Dow slides, Nasdaq pares losses as Fed rate-cut doubts creep in

US equities exhibited volatility on Friday, recovering from earlier losses following a significant sell-off, with the S&P 500 and Nasdaq Composite turning positive while the Dow Jones Industrial Average remained slightly lower, reflecting heightened market uncertainty as the VIX spiked. This sentiment is largely driven by growing doubts about the Federal Reserve's commitment to rate cuts, with officials citing economic resilience and inflation concerns, though some strategists maintain a bullish outlook on equities, anticipating continued data-dependent easing. The tech sector saw a rebound in AI-related stocks after initial declines, while Bitcoin continued its sharp descent, falling below $95,000 amidst substantial ETF outflows and broader crypto liquidations. Concurrently, Walmart shares declined on CEO retirement news, and concerns over China's slowing economic momentum weighed on related stocks.

Analysis

US equities experienced significant volatility on Friday, recovering from earlier losses to close mixed, with the S&P 500 and Nasdaq Composite turning positive while the Dow Jones Industrial Average lagged. This market turbulence, reflected by the VIX spiking above 20, is largely driven by evolving expectations for the Federal Reserve's December rate decision. Traders now assign less than 50% odds to a quarter-point rate cut next month, a sharp decline from 95% a month prior, following hawkish comments from officials like Minneapolis Fed President Kashkari, who cited economic resilience and inflation concerns. UBS strategists, however, maintain a bullish equity outlook, anticipating continued data-dependent rate cuts if inflation remains controlled, projecting the S&P 500 to reach 7,300 by June 2026.

The tech sector, initially hit by an "AI reckoning" rather than a "tech wreck" according to Morgan Stanley, saw a rebound in AI-related stocks like Nvidia and Tesla, which turned positive after early declines. However, Oracle's stock fell over 1% due to investor concerns over borrowing for AI initiatives, and Applied Materials declined 5% on a reported revenue slowdown. Despite some retrenchment, strategists maintain the longer-term bullish case for AI leadership remains intact.

Bitcoin continued its sharp descent, falling below $95,000 and marking a more than 24% decline from its October peak, exacerbated by substantial ETF outflows totaling $870 million. Concurrently, Walmart shares dropped 2.5% following the announcement of CEO Doug McMillon's retirement. Separately, China's economic momentum slowed in October, with retail sales growth at 2.9% and industrial production at 4.9%, contributing to declines in US-listed Chinese stocks.

Key Decisions for Investors

• Monitor Fed rhetoric and upcoming economic data closely, as market sentiment and rate cut probabilities are highly sensitive to these inputs, influencing broader equity performance.
• Evaluate AI-related tech holdings for long-term conviction versus short-term volatility, recognizing the sector's "reckoning" may present entry points for fundamentally strong companies despite current price fluctuations.
• Exercise caution with cryptocurrency exposure, given Bitcoin's significant decline and substantial ETF outflows, indicating continued bearish sentiment and potential for further downside.
• Assess exposure to companies with significant China market ties, as slowing economic momentum in China could impact revenue and growth prospects for multinational corporations.