As Alphabet stock soars, AI news keeps the market on edge
Deadline for submission of manufacturing, service activities, and consumer sentiment reports
Expectations rise for Fed rate cut in December
NEW YORK, Nov 28 (Reuters) – Investors will look for signals about the profitability of artificial intelligence companies and the overall health of the economy next week as U.S. stock markets look to stabilize.
Stocks rebounded this week from their biggest decline since April, helped by increased confidence that the Federal Reserve will cut interest rates in December. However, some of the market’s leading stocks remained volatile. Big moves by Nvidia (NVDA.O)A new tab will open and Alphabet (GOOGL.O)A new tab will openFor example, it was driven by advances in AI.
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Investors said the stock market was poised to maintain this sensitivity after concerns about overheated valuations took away some of the trading momentum that had boosted the market this year.
“The narrative around the profitability of AI is being challenged,” said Matthew Maley, chief market strategist at Miller Tabak. “If that becomes a bigger issue heading into December, it will be a bigger issue for the market.”
RiskMonitor for signs of decreased appetite
Benchmark S&P 500 (.SPX)A new tab will open is up about 16% in 2025, heading into the end of the year with a positive trend. According to the Stock Traders Almanac, December ranks as the index’s third-best performing month, with an average gain of 1.43% since 1950.
But investors are wary of signs that risk appetite is waning. That includes a decline in Bitcoin, which has fallen from more than $125,000 in early October to below $90,000 in recent days.
“Bitcoin acts as a risk proxy for equities, so we will be watching it closely,” said King Lip, chief strategist at Baker Avenue Wealth Management.
The rebound caused the S&P 500 index to fall 1% on Wednesday from its all-time high in late October, while the Nasdaq Composite Index (.IXIC)A new tab will open It has fallen 3% from its peak in late October.
Tech stocks are weighing on the index as questions emerge over the timing of returns on massive investments in AI infrastructure. Wall Street was also watching the impact of a rush to issue bonds by big tech companies to fund AI expansion.
“Investors are starting to rethink how quickly this issue will impact returns,” said Paul Nolte, senior wealth advisor and market strategist at Murphy & Sylvest Wealth Management.
A view showing the New York Stock Exchange (NYSE) Wall Street entrance on April 7, 2025 in New York City, USA. Reuters/Kylie Cooper Purchase License rightA new tab will open
Investor attention this week was particularly focused on Alphabet. The company was seen as an AI laggard, but its stock has soared in recent months, pushing its market capitalization to about $4 trillion.
Parent company Google has received early positive reviews for its new Gemini 3 AI model. In this week’s report, Metaplatform (META.O)A new tab will open Negotiations to spend billions of dollars on Google chips have spooked the stock price of semiconductor giant Nvidia, the darling of the AI industry.
Emphasis on economy
Next week’s economic report will cover activities in the manufacturing and service industries, consumer sentiment, etc. Cloud software provider Salesforce (CRM.N) is also expected to release an earnings report.A new tab will open Retailers such as Kroger (KR.N)A new tab will open And Dollar Tree (DLTR.O)A new tab will open It comes as a generally strong third-quarter reporting season for U.S. companies comes to an end.
Investors will be eagerly looking for clues about the economic backdrop from these reports and early signs about holiday spending after the Black Friday and Cyber Monday retail sales events.
Many of the statistical releases that investors rely on to gauge the health of the economy have been postponed or canceled due to the 43-day U.S. government shutdown that ended this month.
Anthony Saglimbene, chief market strategist at Ameriprise Financial, said investors may have to wait until the announcement arrives in January to get a more complete picture of the economy.
“Investors will have to live with this fog until the end of the year,” Sagrimbene said.
Traders are increasingly betting the U.S. Federal Reserve will cut interest rates at its Dec. 9-10 meeting after several central bank officials expressed a willingness to ease policy despite economic uncertainty.
Federal funds futures prices late Wednesday reflected more than 80% odds of the Fed cutting rates another quarter of a point at the FOMC, after such odds showed a near-coin toss last week, according to CME FedWatch.
The prospect of further monetary easing could benefit a broader segment of the market beyond the tech and AI stocks that have dominated this year. For example, interest rate-sensitive small-cap stocks have outperformed in recent days.
“What I’m looking at is through the end of the year, if the Fed cuts rates, will we see more positive activity outside of technology?” Sagrimbene said.
Report by Lewis Krauskopf. Editing: Alden Bentley and Rod Nickel
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