US markets retreated on Thursday as early momentum from Nvidia’s strong earnings faded and optimism for another Federal Reserve rate cut in December weakened. The Dow fell 0.84% after being up more than 700 points at its session highs. The S&P 500 slipped 1.56% and the Nasdaq dropped 2.16%. All three benchmarks reversed sharply from strong early gains driven by enthusiasm for Nvidia’s latest results.
Nvidia initially surged as much as 5% after reporting better than expected revenue and offering upbeat guidance for the fourth quarter. But concerns about stretched valuations across artificial intelligence stocks took hold. Nvidia ended the day 3% lower despite reassurances from CEO Jensen Huang that demand for Blackwell chips was exceptionally strong and that the AI sector remained healthy.
AI Reversal and Rate Cut Outlook
The broader AI trade also lost ground. Oracle and AMD were among the first large cap AI names to slip into negative territory before Nvidia followed. Investors grew wary after a long rally in the sector and with the probability of a December rate cut falling below 40% following new labour market data.
The shutdown delayed September jobs report showed the US economy added 119 thousand jobs, above expectations. Although unemployment edged higher, the data was strong enough to temper expectations for further easing. Analysts noted that the market narrative had shifted, with some investors reassessing the case for lower interest rates this year.
Volatility rose sharply. The VIX index pushed above 27 for the first time since April’s market sell off, signalling heightened caution as US equities remain close to all time highs.
Walmart bucked the trend and rose around 6% after posting stronger than expected third quarter sales and revenue, supported by continued growth in its e-commerce segment. The move reflected a rotation into more defensive, value oriented companies as investors reduced exposure to high growth tech stocks.
Local Market Outlook
Australian shares are set for a sharp drop at the open. SPI futures are pointing down 142 points or 1.66% on the back of the late session reversal in New York and the spike in global volatility.
Around ten companies will hold annual meetings including Kogan, Lovisa, Macquarie Technology Group, News Corp, Reece, Sims and WiseTech Global. The data calendar features New Zealand trade numbers and preliminary November PMIs from major global economies, along with UK retail sales.
