Nvidia, bitcoin and others among Wall Street’s highest flyers are falling more toward Earth on Friday, and the US stock market is heading for a second straight sharp loss.
The S&P 500 sank 1.2%, coming off one of its worst days since its springtime sell-off and a global wipeout for stocks. Critics had been warning that such drops could be possible because of how high stock prices had shot since April, leaving them looking too expensive. They pointed in particular to stocks swept up in the mania around artificial-intelligence technology.
But even with its recent drops, and the S&P 500 on track for a second straight weekly loss, the index that dictates the movements for many 401(k) accounts is still within 3.3% of its record set late last month, Reuters reported.
The Dow Jones Industrial Average dropped 582 points, or 1.2%, and was pulling further from its own all-time high set on Wednesday, while the Nasdaq composite was down 1.5%, as of 9:35 a.m. Eastern time.
AI stocks once again were at the center of the action. Nvidia, which has become the poster child of the AI frenzy, fell 2.2%.
To be sure, it’s still up 36.1% for the year so far. That would count as a stellar year for most any stock, but Nvidia’s price has more than doubled in four of the last five years.
Bitcoin, meanwhile, fell below $96,000 and is back to where it was in May. It had been near $125,000 only in October.
That helped drag down stocks of companies throughout the crypto industry. Strategy, the company that’s built a hoard of bitcoin and used to be known as MicroStrategy, fell 4%. Coinbase Global sank 3.1%, and Robinhood Markets dropped 3.6%.
Outside of tech and crypto, Walmart sank 2.4% after saying its CEO, Doug McMillon, will retire in January in a surprise move. He had helped the nation’s largest retailer embrace technology more.
One way companies can tamp down criticism about too-high stock prices is to deliver solid growth in profits. That’s raising the stakes for Nvidia’s upcoming profit report coming on Wednesday, when it will say how much it earned during the summer.
If it falls short of analysts’ lofty expectations, even more drops could be on the way. That would have a huge effect on the market because Nvidia has grown to become Wall Street’s largest stock by value, briefly topping $5 trillion.
That means Nvidia’s stock movements have a bigger effect on the S&P 500 than any other’s, and it can almost single-handedly steer the index up or down on any given day.
Another way for stock prices broadly to look less expensive is if interest rates fall. That’s because when bonds are paying less in interest, investors are often willing to stomach higher prices for stocks and other kinds of investments.
Treasury yields had been falling for most of this year on expectations that the Federal Reserve would cut its main interest rate several times this year. And the Fed has indeed cut twice already in hopes of shoring up the slowing job market.
But questions are rising now about whether a third cut, which traders had earlier seen as very likely, will actually happen at the Fed’s next meeting in December. The downside of lower interest rates is that they can make inflation worse, and it’s already still above the Fed’s 2% target.
Fed officials have pointed to the US government’s shutdown, which just ended. It delayed the release of many updates on the job market and other signals about the economy. With less information and less certainty about how the economy is doing, some Fed officials have said it may be better to just wait in December to get more clarity.
In the bond market, the yield on the 10-year Treasury ticked down to 4.09% from 4.11% late Thursday.
In stock markets abroad, indexes tumbled across Europe and Asia. South Korea’s Kospi fell 3.8%, and Germany’s DAX lost 1.8% for two of the larger drops.
