Stocks clawed back some ground Friday after one of the worst days for tech in years. The Nasdaq rose 1.09% to 24,579.42 and the S&P 500 added 0.31% to 7,376.86, while the Dow slipped 237 points, or 0.46%, to 51,285.73, Yahoo Finance reported. That followed Thursday, when the Nasdaq plunged 5.5% to 24,315 and fell into correction territory, more than 10% below its record high set last month, CNBC reported.
So if your 401(k) looked ugly Thursday night, Friday helped a little. Not a lot.
Why did the stock market crash Thursday?
Fear about AI spending after the midterms. The selloff erased about $3 trillion in market value, and at its center were “concerns about a slowdown in data center construction and in AI spending,” according to Yahoo Finance. Candidates in both parties campaigned against new AI data centers, and with Democrats taking Congress, investors worry new rules could slow the building boom that has powered tech stocks. The PHLX Semiconductor Index dropped 12%, its worst day since March 2020, and Nvidia fell 9%. The S&P 500 lost more than 4%.
This isn’t the first warning. In October, the Nasdaq had its worst week since June on AI debt fears, and Meta dragged tech lower after admitting its AI spending caused its first cash outflow in a decade.
Why did stocks bounce back Friday?
Bargain hunting and a strong jobs report. Employers added 165,000 jobs in October, far more than expected, and unemployment dipped to 4.1%. “Demand for labor is skyrocketing,” said Kevin Hassett, director of the National Economic Council. Chip stocks bounced early but faded, and Nvidia, AMD and Intel all ended the day lower. The 10-year Treasury yield rose to about 4.86%.
The catch is that a strong jobs report makes a Federal Reserve rate hike in December more likely, which is part of why the rebound was so modest. The S&P 500 still had its worst week since June.
What does this mean for my 401(k)?
If you’re years from retirement, one bad week is noise, and selling right after a drop can lock in a loss you might otherwise ride out. But it’s worth knowing what you own. Most 401(k) plans lean on S&P 500 index funds, and a big chunk of that index is now a handful of tech and chip companies riding the AI boom. If you’re close to retirement and that concentration makes you nervous, that’s a conversation for your plan’s adviser, not a reason to panic-sell on a Thursday. This is general information, not personal financial advice.
The BeezLoop Take
Wall Street spent two years pricing AI as a sure thing. One election in which voters in both parties pushed back on data centers in their backyards, and the market lost $3 trillion in a day. That says less about the election than about how much of the market was riding on a single bet.
Friday’s bounce doesn’t settle anything. A strong economy is good news for paychecks, but if it pushes the Fed to raise rates again, borrowing gets more expensive just as tech stocks are already shaky.
The open question: was Thursday a one-day panic, or the start of a real reset in what investors will pay for the AI boom?
Sources: Yahoo Finance · CNBC · CBS News (video)
