Wall Street continues to defy bearish pressures, even as several market headwinds emerge. A disappointing U.S. jobs report, a sharp pullback in Nvidia, weakness in Bitcoin, and the collapse of high-profile IPOs have only modestly slowed this year’s equity rally.
Weak jobs report stirs fed cut expectations
August payrolls increased by just 22,000 jobs, barely a third of forecasts and taking the three-month average to levels usually seen before recessions. This fueled expectations of a Federal Reserve rate cut in the coming weeks, triggering a Treasury rally but weighing on bank and consumer-cyclical stocks.
Still, traders quickly shifted focus, rotating into housing names, small caps, and tech giants like Broadcom, Alphabet and Apple, which helped offset weakness in Nvidia and Microsoft.
Nvidia slips, broadcom takes the lead
Nvidia, the market’s biggest driver of the AI trade, has fallen 8% in seven sessions, breaking below its 50-day moving average. Bitcoin followed a similar path, dropping 10% from its August peak.
Yet leadership has rotated rather than vanished. Broadcom surged after a strong earnings report, pushing its two-year gain to 283%, surpassing Nvidia’s 244%. Together, Broadcom and Nvidia now account for 10% of the S&P 500 — underscoring how critical AI remains to U.S. equities.
IPO boom turns bust
Recent blockbuster IPOs, including Figma, Circle, CoreWeave, Chime Financial and Bullish, are now down 40–60% from their post-listing highs. Combined with historically weak September seasonality and lofty equity valuations, the backdrop might appear challenging.
Even so, the S&P 500 is still up 10% year-to-date and sits less than 1% below its all-time high.
Economy needs support, but not urgently
The weak jobs print raised concerns over U.S. growth momentum. Bank of America economists, who had previously expected no rate cuts in 2024, now see two cuts this year, citing Fed Chair Jerome Powell’s emphasis on labor-market risks.
That said, structural factors — including fewer foreign-born workers and an aging population — have reduced the number of jobs needed to stabilize unemployment, estimated now at below 50,000 per month. Capital spending, strong services activity, and government deficits have so far kept GDP growth resilient.
Valuations remain a ceiling
Despite the resilience, valuations remain a constraint. The S&P 500 forward P/E ratio hovers around 22.5, near the same level where rallies stalled in the past three years. The Nasdaq 100 faces similar resistance at a P/E of 28.
Analysts caution that while Fed easing could extend the rally, the high valuation bar may limit long-term returns.
