Why were stocks down today? What to know as Dow gives up 700-point gain

U.S. stocks whipsawed, with the blue-chip Dow swinging through 1,000 points, before closing lower.

Bolstered by strong earnings from artificial intelligence chip giant Nvidia and discount retailer Walmart, stocks opened higher and the Dow climbed 700 points. However, stocks slowly started losing ground after the delayed September jobs report appeared to dash hopes for another rate cut when the Federal Reserve meets next month.

At the close, the Dow was down 386.51 points, or 0.84%, at 45,752.26. The tech-heavy Nasdaq ended down 486.181 points, or 2.16%, at 22,078.048 and the broad S&P 500 dropped 103.40 points, or 1.56%, to 6,538.76. The benchmark 10-year yield slipped to 4.098%.

The employment report, originally due in early October but delayed because of the 43-day government shutdown, showed 119,000 jobs added in September and the unemployment rate inching up a tenth to 4.4%. The data were much better than the 51,000 new jobs some economists had expected, but job gains for July and August were revised down by 33,000, making the picture more mixed.

“Given the Fed’s recent hawkish shift and the lack of official data scheduled before (its Dec. 10 meeting), it is understandable that the market thinks the next move won’t come until early 2026,” wrote James Knightley, chief international economist at Dutch bank ING.

The CME Fedwatch tool, which measures the chances investors see for a rate move, show a nearly 40% chance for a rate cut in December.

Despite recent hype of an AI bubble, many analysts said they don’t see it.

“This question of a bubble being suggested by some is easy to refute,” said Nancy Tengler, chief executive and chief investment officer at Laffer Tengler Investments. “After all, after the headlines settle, stocks ultimately trade on earnings.”

And Nvidia proved its earnings chops, analysts said.

“NVIDIA is miles ahead of any competition in the space with a huge knowledge and intellectual property moat,” said Mark Malek, chief investment officer at Siebert Financial. “Whether it was by plan or happenstance, NVIDIA has the right product for the right moment…NVIDIA earnings were not just good, they were a loud ‘told you so.'”

In fact, corporate earnings were strong across the board, said Kristy Akullian, head of iShares investment strategy for the Americas at BlackRock.

“Heading into third quarter, analysts expected just 6% earnings growth,” she said. “Now that Nvidia released earnings…we can firmly report that actual results came in more than double that, marking the strongest quarter” since the last three months of 2021.

Uncertainty is the stock market’s worst friend, analysts said. Even with Nvidia’s results calming some of the AI bubble talk, the outlook is still cloudy, they said.

“Investors looking for an explanation for the current market pullback should look no further than the recent uncertainties that have resurfaced,” said Bret Kenwell, U.S. investment analyst at trading platform eToro. “Questions around the Fed’s interest-rate path, labor market, legal ruling on tariffs, and government shutdown are just a few of them. Markets don’t like uncertainty, and when it rises, we often see volatility as a result.”

The biggest issue, he said, is the market’s flying blind on the health of the economy.

“Not only did investors and the Fed have to forgo most major economic reports for more than a month, the incomplete picture we’re receiving makes it difficult to get an accurate view of the economy,” Kenwell said.

The government said it wouldn’t release an October jobs report ever because no data were collected last month due to the shutdown.

No one can say for certain if the market will rally again soon, but stocks have history on its side. The market’s entering “what’s typically a seasonally strong stretch,” Kenwell said.

Historically, stocks rally at the end of the year, spawning the phrase “Santa Claus rally.” The Dow has risen 77% of the time from the day after Christmas through the first two trading days of January. The S&P 500 has had a positive return in this period 79% of the time since 1950, with an average return of 1.3%.

Medora Lee is a money, markets and personal finance reporter at USA TODAY. You can reach her at mjlee@usatoday.com and subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday morning.

This article originally appeared on USA TODAY: Why were stocks down today? Dow whipsaws after NVDA, WMT earnings