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Financial Markets 11/13 15:33
NEW YORK (AP) -- The U.S. stock market tumbled Thursday to one of its worst
days since its springtime sell-off, as Nvidia and other AI superstar stocks
kept dropping on worries their prices shot too high. Also hurting the market
were questions about whether coming cuts to interest rates that Wall Street has
been banking on will actually happen.
The S&P 500 sank 1.7% and pulled further from its all-time high set late
last month. It was the worst day in a month for the index at the heart of many
401(k) accounts and the second-worst since April's plunge after President
Donald Trump shocked the world with his "Liberation Day" tariffs.
The Dow Jones Industrial Average dropped 797 points, or 1.7%, from its
record set the day before, while the Nasdaq composite lost 2.3%.
Nvidia was the heaviest weight on the market after the chip company fell
3.6%. Other stocks swept up in the artificial-intelligence frenzy also
struggled, including drops of 7.4% for Super Micro Computer, 6.5% for Palantir
Technologies and 4.3% for Broadcom.
Questions have been rising about how much higher AI darlings can go
following their already spectacular gains. At the start of this month, Palantir
was sporting a stunning rise of nearly 174% for the year so far, for example.
Such sensational performances have been one of the top reasons the U.S.
market has hit records despite a slowing job market and high inflation. AI
stock prices have shot so high, though, that they're drawing comparisons to the
2000 dot-com bubble, which ultimately burst and dragged the S&P 500 down by
nearly half.
In the meantime, stocks outside of AI also fell across Wall Street as
traders worried that the Federal Reserve may not deliver another cut to
interest rates in December, as many had been expecting.
Wall Street loves lower interest rates because they can goose the economy
and prices for investments, even though they can also worsen inflation. A halt
in cuts could undercut U.S. stock prices after they already ran to records in
part on expectations for more reductions.
Expectations have come down sharply in recent days that the Fed will cut its
main interest rate for a third time this year. Traders now see roughly a coin
flip's chance of that, 51.9%, down from nearly 70% a week ago, according to
data from CME Group.
Recent comments from Fed officials have helped drive the doubt.
Susan Collins, president of the Federal Reserve Bank of Boston, said late
Wednesday that it's likely appropriate to leave interest rates steady "for some
time." That was a turnaround from a speech last month, when she supported
another cut.
The Fed's job became more difficult recently because of the U.S.
government's shutdown, which delayed updates on the job market and other
signals about the economy. That left it less certain about whether the slowing
job market or high inflation is the bigger threat.
The stock market mostly rose through the U.S. government's shutdown, as it
has often done historically, but Wall Street is bracing for potential swings as
the government gets back to releasing those updates. The fear is that the data
could persuade the Fed to halt its cuts to rates.
The "looming data deluge may spur additional volatility in the coming
weeks," according to Doug Beath, global equity strategist at Wells Fargo
Investment Institute.
On Wall Street, The Walt Disney Co. helped lead the market lower after
falling 7.7%. The entertainment giant reported profit for the latest quarter
that topped analysts' expectations, but its revenue fell short.
That helped offset a jump of 4.6% for Cisco Systems after the tech giant
delivered profit and revenue that were bigger than analysts estimated.
Another one of the relatively few stocks to rise was Berkshire Hathaway, the
company run by famed investor Warren Buffett. He is known for loving bargains
and won't buy stocks when he considers them too expensive. Berkshire Hathaway
rose 2.1%.
All told, the S&P 500 fell 113.43 points to 6,737.49. The Dow Jones
Industrial Average dropped 797.60 to 47.457.22, and the Nasdaq composite sank
536.10 to 22,870.36.
In the bond market, Treasury yields pushed higher, which put downward
pressure on prices for stocks and other investments.
The yield on the 10-year Treasury rose to 4.12% from 4.08% late Wednesday.
In stock markets abroad, indexes sagged in Europe following modest gains in
Asia.
Tokyo's Nikkei 225 index rose 0.4%, even as Japanese tech giant SoftBank
Group lost another 3.4%. It's been struggling since it said earlier this week
that it had sold all of its $5.8 billion stake in Nvidia.
Another loser was bitcoin, whose price fell back below $99,000. It had been
nearing $125,000 last month.
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AP Writers Teresa Cerojano and Matt Ott contributed.
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