Dow Erases November Losses, Heads for 5-Day Winning Streak: What the Data Says About the Rally

AI Bubble Bursts, But the Patient Isn't Dead Yet U.S. stocks presented a mixed bag recently, a stark contrast to the seemingly endless upward trajectory we've seen for much of the year. The S&P 500 managed a gain on Friday, but still posted a 1.6% loss for the week. The Nasdaq Composite fared worse, dropping 3% – its worst week since April. This wasn't a broad market collapse, though. The Dow Jones Industrial Average actually finished slightly positive *for the day*, a detail easily missed in the broader narrative of decline.

AI Correction or Data Blackout Panic?

Sector Rotation or AI Winter? The headline grabbing news is the pummeling AI stocks took. Microsoft, Nvidia, AMD, Palantir, Oracle, and Meta Platforms collectively shed over $820 billion in market value this week. AI stocks lost more than $820 billion this week. Super Micro Computer, a darling of the AI infrastructure play, plunged 23%. The S&P 500 technology sector, as a whole, was the worst performing, down 4.2%. Is this the beginning of a long-feared AI winter, or simply a much-needed correction? It's tempting to declare the AI bubble burst, but let's not get ahead of ourselves. Apple and Alphabet only dipped 0.7% this week, and Amazon even eked out a fractional gain. A sector rotation seems to be occurring, with investors pulling profits from high-flying AI stocks and redeploying them elsewhere. Healthcare, for example, is seeing some profit taking today but is still up 9.2% this month. (That's more than double the next best performing sector.) Retail is only up slightly on Black Friday, but it's heading for its best week in six months. Are consumers tapped out, or are they just bargain hunting with more discernment? The timing of this pullback is interesting, to say the least. Palantir's earnings report seems to have triggered the initial sell-off, with investors suddenly questioning its valuation. But was that the only catalyst? Two top Wall Street CEOs also warned of a potential market pullback, and Nvidia CEO Jensen Huang added fuel to the fire by suggesting China might "win the AI race." He later walked that statement back (clarifying that China is "nanoseconds behind America in AI"), but the damage was done. And this is the part of the report that I find genuinely puzzling. The government shutdown has created a vacuum of official economic data. The jobs report is MIA. Other key indicators are AWOL. Investors are left relying on corporate earnings and alternative data sources. But what happens when those alternative data points – like ADP's private employment report showing only 42,000 jobs added last month – paint a conflicting picture? Consumer sentiment is also down, near record lows, supposedly due to the government shutdown. How much of this market volatility is driven by genuine concerns about AI valuations, and how much is simply a reaction to a lack of reliable economic data?

Black Friday: Spending Without the Splurge?

Black Friday and Beyond Black Friday's performance adds another layer of complexity. The retail ETF is only up slightly, 0.1%, even as it heads for its best week in six months. This suggests that while consumers *are* spending, they aren't necessarily splurging. The market was also disrupted by a technical outage at the Chicago Mercantile Exchange, which affected premarket activity. Trading volume was down 34% below the 30-day average. While the S&P 500 was up 0.3% in Friday’s post-holiday shortened session. (The S&P 500 was up 0.3% on Friday, a post-holiday shortened session) This Correction Was a Long Time Coming Ultimately, this feels like a healthy, if overdue, correction. The AI sector had become detached from reality, fueled by hype and speculation. The government shutdown and lack of economic data created an environment of uncertainty, amplifying the market's sensitivity to negative news. Now, the market has to rely on corporate earnings reports and alternative data. But with investors pulling profits from AI stocks and redeploying them into other sectors, the overall market remains resilient.