What on Earth just happened to the stock market?

Specialist Anthony Matesic works on the floor of the New York Stock Exchange, Thursday, Nov. 20, 2025. (AP Photo/Richard Drew)

Redemption Day quickly turned into Reckoning Day on Wall Street.

Going into Thursday, the sagging stock market had two big questions it wanted answered: Is the artificial intelligence bubble about to burst, and will the U.S. Federal Reserve cut interest rates in December?

At first, it seemed like traders finally got the clear response they had been eagerly awaiting:

• Nvidia reported super-strong earnings Wednesday evening, initially easing fears that demand for AI had faded.
• And Thursday morning’s jobs report showed the unemployment rate had risen unexpectedly, and the U.S. economy had lost jobs in August for the second time in three months. The market bet the Fed could be forced to lower rates next month to give the labor market a needed boost.

Phew. Right?

Wrong.

Traders at first cheered Thursday morning, sending all three major stock indexes sharply higher. At one point, the Dow Jones was up more than 700 points. But by late morning, the rally started to wear off, and sentiment – and markets – turned sharply negative by midday.

So what happened? Traders came to realize that the answers they thought they received actually just raised new, more difficult questions.

“People are trying to figure out A.) What’s better than off the charts in terms of what Nvidia can say from here and realizing that there’s no reward at these levels and B.) how the Fed can cut if jobs numbers are really better,” said Michael Block, market strategist at Third Seven Capital.

By the end of the day Thursday, it was like nothing had changed: Markets resumed their slide that has sent the S&P 500 down more than five per cent from the all-time high it reached just before Halloween.

• The Dow, in an 1,100-point swing – its biggest since the tariff-induced turmoil in April – fell nearly 400 points by the end of Thursday.
• The S&P 500 fell 1.6 per cent and the Nasdaq tumbled more than two per cent.
• Nvidia, which had gained as much as 5 per cent earlier in the day, closed three per cent down.
• And Bitcoin, which initially rallied above US$92,000, fell to close to $86,000 late Thursday.

Markets are only modestly better Friday. The Dow, S&P 500 and Nasdaq were all a bit higher, but Nvidia fell two per cent. Bitcoin also sank two per cent Friday morning, slipping below $85,000 – its lowest level since April – and on pace for its worst month since 2022.

Barring a substantial rebound Friday, markets are on track for their worst week in seven months.

So, what’s next?

Nvidia’s quarterly earnings were so blow-out investors began to fear that the world’s most valuable company and maker of the most precious commodity in tech – high-end AI chips – couldn’t possibly keep up this pace of growth for much longer.

Eventually, demand will ebb. And even if it doesn’t anytime soon, the AI market isn’t just Nvidia – other, less powerful companies could still be overinflated. Perhaps, traders feared, Nvidia’s earnings didn’t actually answer any of their questions at all.

Investors also looked more closely at a particularly confusing jobs report and realized it might not say exactly what they initially thought: The headline number showed much stronger-than-expected hiring in September, suggesting that the worst of the early-summer hiring slowdown may be behind us. The unemployment rate may have risen because more workers were entering the labor force, resuming their job searches after the summer lull.

If the Fed takes a glass-half-full approach – particularly after minutes from its last meeting released Wednesday showed significant resistance to another rate cut in December – perhaps that rate cut won’t be coming next month, after all.

So here we are on Friday, right back where we started. CNN’s Fear and Greed Index is in “extreme fear” mode and at its lowest level since – you guessed it – April. The VIX volatility index spiked to 27, its highest level since… do we even need to say it?

Until investors get satisfactory answers to their questions, expect more market volatility going forward. But with shutdown-delayed government data, an end to earnings season and traders about to go on vacation for the holidays, it’s not clear those answers are coming anytime soon.

Analysis by David Goldman, CNN

CNN’s Matt Egan contributed to this report.