The seemingly sturdy U.S. stock market has begun to wobble. Its monthslong tech-driven rally may be running out of steam amid broader uncertainty about the U.S. economy’s outlook.
On Tuesday, the S&P 500, one of the broadest measures of U.S. stocks, fell more than 0.5% and looked headed for its fourth-straight day of losses. The Dow Jones Industrial Average and the tech-heavy Nasdaq were also in the red.
Heavier losses were likely prevented by so-called retail investors, like day traders, who have adopted “buy the dip” strategies of purchasing shares at a relative discount whenever the market turns south.
“Markets are bracing for a turbulent week as major economic data returns and investor anxiety grows around interest rates, tech earnings and cryptocurrency weakness,” Lukman Otunuga, senior market analyst at FXTM global brokerage group, said in a statement.
The longer-term direction of the market and the economy writ-large could be determined in the coming days by a bevy of critical data set for release, including a long-delayed jobs report and earnings by Nvidia, the company at the heart of the artificial intelligence boom.
“Nvidia’s results could be a defining moment for the AI rally, while the delayed [jobs] report may reset expectations around the Fed’s next move,” Otunuga said.
The data arrive as jitters about the Federal Reserve’s looming interest rate decisions — now a source of intense debate thanks to a weakening jobs market and stubborn inflation — have sparked selloffs of riskier assets like bitcoin.
This year’s stock gains have been fueled largely by companies investing in AI — especially the group of tech stocks known as the “magnificent seven,” or Mag 7, whose success this year has been so overwhelming that they have often been able to overcome weaknesses elsewhere and power entire indexes higher.
Among the Mag 7, Nvidia has proven the bellwether — and this month, its shares have fallen 10%, as many investors looked to take profits on what has otherwise been a year of outsized gains.
While Wall Street generally expects the company to report steady gains Wednesday, some high-profile names have begun selling their Nvidia stock or betting against the company. They include venture capitalist Peter Thiel, Japanese conglomerate SoftBank Group and Michael Burry, the investor made famous by the movie “The Big Short.”
For all the support the AI investment boom has provided to markets, the U.S. economy is still heavily dependent on consumer spending — and assessments of household financial stress remain mixed. The government shutdown, which officially ended last week, didn’t help.
On Tuesday, Home Depot reported quarterly results that missed estimates, something it blamed on more customers shying away from big-ticket items.
“We believe that consumer uncertainty and continued pressure in housing are disproportionately impacting home improvement demand,” CEO Ted Decker said in a statement.
Others are more upbeat.
“Despite some signs of stress, consumers remain in fairly solid financial shape,” analysts with Bank of America wrote Tuesday, noting checking deposits are still above 2019 levels for every income cohort, even after adjusting for inflation, while the pace of drawdowns has slowed.
In a further sign that this year’s market exuberance may have run its course, the price of bitcoin has fallen some 12% over the past week and more than 25% over the past month — one of the most acute reversals it has ever recorded and which has wiped out all its gains for 2025.
The price of bitcoin is typically correlated with the outlook for interest rates set by the Fed: When traders expect lower rates, the value of bitcoin rises because investors have more money to spend on speculative assets — and vice versa when interest rates are elevated.
Over the past week, traders began to aggressively dial back the odds that the Fed will enact significantly lower interest rates next year amid concerns that the rate of inflation continues to sit well beyond the Fed’s 2% target.
“A Fed that cuts earlier may cut less, particularly if the cost of providing insurance to the labor market comes in the form of above-target inflation,” analysts with Morgan Stanley wrote in a note Monday.