Wall Street is heading into the Thanksgiving stretch with traders arguing about whether the AI trade still has any power left, and the mood is tense as hell.

Thanksgiving week is of course shorter than usual, with markets shut on Thursday and open for only half a day on Friday, and people already expect messy price swings. November is usually a strong month, but this time the major indexes have been sliding since the start of the month, after the big AI rally lost heat and investors started doubting the high valuations sitting on tech names.

Trading volume is also expected to fall next week, and with no major events before the Federal Reserve’s December meeting, the last days of the month may turn into a slow-motion headache.

Thursday’s reversal made things worse. Stocks jumped early after Nvidia released strong earnings late Wednesday.

Traders also reacted to delayed jobs numbers for September that came in better than expected, giving some hope that the AI trade could push the market into December with momentum.

Instead, the market flipped in the afternoon, wiping out those gains. Then came Friday, and stocks surged after the New York Federal Reserve’s chief said a December rate cut was still possible. This mix of chaos left traders unsure of what’s coming next.

Fed meeting pushes investors into rate bets

Charlie Ashley at Catalyst Funds wrote that “a reversal of this magnitude suggests that positive sentiment is waning, and investors are using the post-earnings pop in Nvidia’s stock as an opportunity to take profits.”

He added that if this is the start of a deeper pullback, the Fed’s December decision becomes even more important. Ashley said, “If the Fed decides to hold rates, the cost of capital will be another headwind for equity valuations.”

By mid-day Friday, traders were betting hard on a rate cut at the Fed’s final meeting of the year on December 10. Interest-rate futures priced in almost a 75% chance of a quarter‑point cut, up from 39% on Thursday and 44% a week earlier. The Fed’s benchmark rate is now 3.75% to 4.00%, and a cut would be a big shift after months of waiting.

But data issues added fresh confusion. Traders learned Friday that the Fed will not receive key inflation data before the meeting because the Bureau of Labor Statistics canceled the October consumer price index. The CPI for November, originally set for release on December 10, will now come out on December 18.

That means the Fed must make its decision without full inflation data. Now both bulls and bears are watching the next move.

Concerns are climbing over whether the hundreds of billions being invested into AI represent a bubble that might not pay off. Some strategists are telling investors to reduce tech exposure and move into defensive positions.

Others still believe in long‑term gains based on the growing use of AI, steady U.S. economic growth, and continued spending by wealthier consumers.

Mark Hackett at Nationwide said the reaction to Nvidia and the payroll report was “universally positive,” but the sell-off that followed was unusual compared to the last six months. He said the normal pattern had been early declines followed by recoveries, not “buy and then sell the rally.”

Hackett said it’s too early to say there is a shift, but it’s something traders must notice. By late Friday, all major averages were on track for a losing week. The Dow was down 1.3%, the S&P 500 down 1.2%, and the Nasdaq down 1.8%.

Tech debt grows as companies push AI investment

The week ahead includes earnings from Agilent Technologies and Keysight Technologies on Monday; Best Buy, Analog Devices, J.M. Smucker, HP, Workday, Autodesk, NetApp, and Dell Technologies on Tuesday; and a quiet Wednesday. Markets close Thursday for Thanksgiving and shut at 1 p.m. ET on Friday.

Debt levels inside tech are now another problem. Meta’s $27 billion funding deal with Blue Owl Capital in October helped push debt issuance by hyperscalers above $120 billion this year, compared with an average of $28 billion over the past five years, according to BofA Securities.

Oracle is facing pressure of its own. The spread on its bonds has widened 48 basis points since September. Its $3.25 billion, five‑year bond trades 104 basis points over Treasuries, double the level from September 15.

Demand for credit default swaps tied to Oracle has also climbed. ICE Data Services shows the spread on Oracle’s five‑year CDS has more than doubled since September, reaching the highest level since 2023.

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