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(Bloomberg) — A tech-led rebound in stocks faded as caution prevailed on Wall Street ahead of a deluge of economic data and concerns over the Federal Reserve’s ability to slash interest rates in December. Bonds dropped.

The relief brought by the US shutdown’s end gave way to volatility this week as various Fed speakers damped wagers on further policy easing. Hot areas favored by momentum traders such as artificial-intelligence whipsawed. Bitcoin was barely up for 2025. While the S&P 500 almost erased a 1.4% slide, most of its shares fell. Nvidia Corp. rose ahead of its earnings.

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The outlook for lower rates favoring Corporate America alongside booming AI prospects have powered a torrid surge since the April meltdown, making many traders look past high valuations to keep chasing the market higher.

Earnings for most big tech companies have been in line or above expectations, though the outlook has been murky when it comes to where borrowing costs are headed. As Nvidia gets ready to report Wednesday, options traders are pricing in a 6.2% stock swing in either direction – its highest implied move in a year.

“Its earnings will be a huge test for the markets and the AI-trade, and could either ease fears about AI valuations or inflame them considerably,” said Kyle Rodda at Capital.com.

Also next week, big box retailers like Walmart Inc. and Target Corp. will report their results, offering a read on the state of consumer spending – the main engine of the American economy.

The S&P 500 held near 6,735 after briefly testing its 50-day moving average. A gauge of megacaps halted a three-day rout. The cost of protecting Oracle Corp.’s debt against default surged as jittery investors rush to hedge against the billions of dollars the firm is pouring into AI.

The yield on 10-year Treasuries climbed three basis points to 4.15%. The dollar wavered. UK markets got hit as speculation about the budget heightened uncertainty over the nation’s finances. Oil climbed as geopolitical risks mount from Russia to Iran.

“Stocks should bounce back here, but the dip buyers have been burned lately, so it might be a slow move back up to regain confidence,” said Bob Lang founder of Explosive Options.

We also saw some pretty clear rotation this week into health care primarily and consumer staples – looking like they have bottomed, according to Ken Mahoney at Mahoney Asset Management.

“Not really what you want to see if you are in the AI trade or adjacent stocks,” Mahoney said. “This is a unique circumstance where it feels like a mini bear market in some stocks” even though the S&P 500 is not that far from its highs.

“What’s happened recently in the market isn’t even close to a tech wreck, but it may be a bit of a tech reckoning,” said Daniel Skelly, head of Morgan Stanley’s Wealth Management Market Research & Strategy Team.

The recent volatility hasn’t altered the longer-term bullish case for the AI leadership, he said. But health care remains one of the market’s key overlooked stories. Even though it’s been the S&P 500’s strongest sector over the past three months, Skelly says valuations are still attractive.

Breadth deterioration in equities remains an ongoing concern, indicating a more tactical defensive stance and sector rotation, according to Craig Johnson at Piper Sandler.

Still, the S&P 500 managed to hold above its average price of the past 50 days. Failure to do so would invite a deeper pullback, Johnson noted.

“The general trend has been to buy the dip, which could provide a respite,” said Melissa Brown at SimCorp. “Retail investors may be spooked temporarily, but are likely to come back in if they believe the long-term story driving many of the names that have been gutted remains intact.”

Brown notes that a real rebound, though, may have to wait until government data starts flowing again and investors get a better read on the state of the economy and inflation.

“But it will only be a recovery if the economy continues to grow and inflation does not,” she said.

As labor-market and inflation reports return, fundamentals should help distinguish a true trend from emotion-driven selling, making the recent pullback feel more like a reset than a turning point, according to Mark Hackett at Nationwide.

A slew of Fed officials have in recent days expressed skepticism over the need for a cut in December, or outright opposed one. It remains unclear whether they can persuade enough voting members of the Federal Open Market Committee, given that a number of policymakers are more worried about job weakness.

Their remarks came less than a month after Chair Jerome Powell warned that a December cut is far from a “foregone conclusion.”

Financial markets have taken note of the volume of comments coming recently from the Fed’s so-called inflation hawks. Investors have marked down the odds of a rate cut in December to less than 50%. Before the Fed’s October meeting, they were almost fully pricing in a reduction.

“The tough but business-as-usual wrestling match over a December rate cut risks morphing into a crisis of governance at the Fed, with implications that extend well beyond whether it does or does not cut then,” said Krishna Guha at Evercore. “Absent miraculous clarification from limited data, Powell is in a rough spot. We urge cool heads and compromise.”

Guha says that he still leans toward a “hawkish cut,” but the odds have diminished.

“Our expectation for a soft October employment report and under-control October core CPI inflation should settle the internal debate at the FOMC in favor of an additional 25 basis-point rate cut,” said Gennadiy Goldberg at TD Securities. “With that said, the decision is likely to be contentious, with a high possibility of additional hawkish dissents.”

“Despite the cautious rhetoric from Fed officials this week, we believe any decision will ultimately be data-dependent, said Ulrike Hoffmann-Burchardi at UBS Global Wealth Management. “With the US government now reopened, the Fed’s decision will be guided by incoming data on inflation as well as employment.”

She noted that even if the official October jobs report does not include the unemployment rate reading, the payrolls figure should still provide a good indication of the health of the labor market. Some private data alonsgide sentiment surveys should also allow the Fed to continue its rate-cutting cycle if inflation remains under control, she added.

As traders geared up for a deluge of economic data that will shape the Fed outlook, this week’s bout of risk aversion deepened the selloff in Bitcoin from a record high reached in early October.

The largest digital-asset sank below $95,000. The crypto market remains under strain after $19 billion in liquidations on Oct. 10 in turn erased over $1 trillion from the total market value of all cryptocurrencies, CoinGecko data shows.

Corporate Highlights:

Applied Materials Inc. suffered a sales decline last quarter and predicted another drop in the current period, though the chip-equipment maker sees demand improving in the second half of 2026. Google has offered to tweak its ad tech products to settle a European Union order after a near-€3 billion ($3.4 billion) antitrust penalty, stopping short of a partial breakup watchdogs favor. Walmart Inc. Chief Executive Officer Doug McMillon, who over a decade ushered the big-box behemoth into the Internet age, will retire in February. He’ll be replaced by US head John Furner — long viewed as the heir apparent. Warner Bros. Discovery Inc. amended the contract of Chief Executive Officer David Zaslav to ensure his stock options remain eligible to vest even if the media company is sold. Merck & Co. agreed to acquire Cidara Therapeutics Inc., a biotech company developing a flu treatment, as part of its ongoing efforts to make up for the upcoming patent loss of its blockbuster cancer drug Keytruda. Bristol Myers Squibb Co. fell after one of its most important experimental medicines appeared unlikely to benefit patients who had suffered a heart complication, another setback for the drugmaker’s product pipeline. Boeing Co. stands to win most of a major order from Flydubai for single-aisle aircraft, though Airbus SE still has a long-shot chance to pry some business from an airline that’s never ordered from the European planemaker. Emirates is planning to use SpaceX’s Starlink to upgrade the onboard Wi-Fi in its fleet, according to people familiar with the matter, even though the service isn’t currently approved by the government. BlackRock Inc. has agreed to pay up to €2 billion ($2.33 billion) to form a data center venture with Spanish engineering firm ACS SA. American Tower Corp. and European buyout firm EQT AB are among parties weighing bids for French tower company TDF Infrastructure, people with knowledge of the matter said. A group of First Brands Group creditors is demanding new, independent advisers for company units that issued nearly $2.5 billion in off-balance-sheet debt, claiming conflicts of interest threaten to disrupt the sprawling insolvency case of auto-parts maker. JBS NV, the world’s largest meat supplier, reported a quarterly operating loss at its US beef business as a shortage of cattle continues to hit margins at the unit. BHP Group Ltd. is liable to compensate hundreds of thousands of victims of a devastating dam collapse in Brazil, a London judge ruled, moving closer to a potential multi-billion dollar payout a decade after the disaster. Nu Holdings Ltd. said artificial intelligence features it started to deploy in Brazil helped the fintech increase credit-card limits for some clients, boosting third-quarter revenue and profit. Sigma Lithium Corp. stocks rose as investors focused on the company’s forecast to resume mining operations by the end of the month, despite another quarter of cash burn, lower sales and production volumes. Allianz SE, the German insurer that owns bond manager Pacific Investment Management Co., raised its outlook for full-year profit after third-quarter earnings rose, driven by its property-casualty insurance and asset management businesses. Siemens Energy AG substantially raised its mid-term financial targets on strong demand for gas turbines and data center equipment as well as restructuring progress at its Gamesa wind turbine unit. Richemont sales climbed as shoppers from the US to China snapped up the luxury group’s pricey Cartier and Van Cleef & Arpels jewelry. Jaguar Land Rover Automotive Plc swung to a £559 million ($735 million) quarterly loss and slashed its guidance after a cyberattack temporarily halted production at the UK’s largest automaker. Japan’s biggest banks raised their annual earnings targets to fresh records and announced plans to buy back shares, as trade fears subside and rising interest rates boost lending profitability. Some of the main moves in markets:

Stocks

The S&P 500 was little changed as of 4 p.m. New York time The Nasdaq 100 was little changed The Dow Jones Industrial Average fell 0.7% The MSCI World Index fell 0.3% Bloomberg Magnificent 7 Total Return Index rose 0.2% The Russell 2000 Index rose 0.2% Currencies

The Bloomberg Dollar Spot Index was little changed The euro fell 0.1% to $1.1621 The British pound fell 0.2% to $1.3171 The Japanese yen was little changed at 154.53 per dollar Cryptocurrencies

Bitcoin fell 4.6% to $94,261.59 Ether fell 1.5% to $3,131.9 Bonds

The yield on 10-year Treasuries advanced three basis points to 4.15% Germany’s 10-year yield advanced three basis points to 2.72% Britain’s 10-year yield advanced 14 basis points to 4.57% The yield on 2-year Treasuries advanced two basis points to 3.61% The yield on 30-year Treasuries advanced four basis points to 4.75% Commodities

West Texas Intermediate crude rose 2% to $59.89 a barrel Spot gold fell 2.1% to $4,084.03 an ounce ©2025 Bloomberg L.P.