The artificial-intelligence trade is still in trouble.
Blockbuster results from AI bellwether Nvidia sparked a furious rally from Tokyo to New York early Thursday before indexes reversed course and tumbled in the largest blown gain since April's tariff-fueled market turmoil.
The sharp move extended a painful stretch for the stocks at the heart of the AI boom, demonstrating how on edge investors remain over their swollen valuations and aggressive spending plans, which some fear mark signs of a bubble.
Adding to the worries on Thursday: A shutdown-delayed jobs report ended a weekslong blackout on key economic data, but did little to clarify the state of the labor market and the potential for a long-debated December interest-rate cut from the Federal Reserve.
For a while, investors cheered the dissipating fog, with the Nasdaq composite surging as much as 2.6%. Then tech shares slumped, driving the index to a 2.2% decline. Nvidia climbed as much as 5%, before finishing the session down 3%. Bitcoin slumped anew, to its lowest 4 p.m. level since April. The Cboe Volatility Index, known as Wall Street's "fear gauge," rose around 12%.
"What stands out to me is the lack of any substantial shift in narrative to cause such a big shift," said Tony Roth, chief investment officer at Wilmington Trust Investment Advisors. "There's just not a lot of confidence in the market right now."
The S&P 500 closed 1.6% lower, after initially jumping 1.9%. The Dow Jones Industrial Average swung more than 1,000 points, surrendering a more than 700-point gain and losing 0.8% to close 387 points lower.
One factor behind the moves: The much-awaited release of the September jobs report, postponed during the government shutdown, showed the U.S. added 119,000 positions, beating consensus forecasts. The unemployment rate, however, unexpectedly ticked up to 4.4%.
Some investors said the numbers were both stale and contradictory, giving little guidance on what to expect from a divided Fed next month.
Traders had scaled back rate-cut bets when the Labor Department said October employment data wouldn't be published until mid-December, after the central bank's next meeting. That reflected investors' views that policymakers would need more evidence of a weakening labor market to justify a cut.
Interest-rate futures suggested investors now see a nearly 40% chance that Fed officials will cut rates in December, according to CME data. That is up from 30% on Wednesday, but down from around 99% a month ago. The yield on the 10-year Treasury note fell to 4.105% on Thursday, down from 4.132% on Wednesday.
The stock selloff came after Nvidia reported a 62% increase in sales of AI data center chips and raised its guidance for the current quarter. In recent sessions, investors have punished big tech, worried that some companies are spending too much on data centers, chips and other AI infrastructure with little hope of recouping their investments soon.
Investors are also increasingly jittery about how tech giants are using large and complex debt deals to finance the infrastructure build-out. The cost of swaps that protect holders against default in bonds issued by Oracle -- a big supplier of computing power to AI labs -- has jumped by nearly 50% since mid-October, according to data provider Solve.
Other stocks tied to the AI trade fell, too. Micron Technology dropped 11%, extending its weekly loss to 18%. Western Digital slid 8.9%, and Advanced Micro Devices retreated 7.8%.
"Nvidia is a leader in the market but the AI ecosystem is beyond Nvidia, " said Omar Aguilar, chief investment officer at Schwab Asset Management. "The credit market seems to be providing a barometer that there may be risks on the horizon."
And declines in everything from industrial firms to bitcoin suggested a broad retreat from risk. At 4 p.m., the largest cryptocurrency was at $86,337, down more than 30% from a peak above $126,000 set on Oct. 6.
Lonely bright spots in the market included Walmart, which rose 6.5% to lead gains in the Dow industrial and S&P 500 after the largest U.S. retailer reported robust earnings and raised its annual outlook.
With the corporate earnings season drawing to a close and no major economic data releases currently expected in the run-up to the Fed's meeting, the next market signposts remain unclear. That uncertainty might be encouraging large institutional investors to trim their holdings to lock in gains from earlier in the year.
Individual investors also showed signs of ebbing confidence. Retail investors were net sellers of single stocks this week, unloading about $728 million-worth, the lowest level in four months, according to research by JPMorgan Chase.
"The market was priced for perfection and now the concerns about AI and a pause in Fed rate cutting are spreading cracks through the edifice of perfection," Wilmington Trust's Roth said.