WALL STREET SPLITS: DOW JONES HITS RECORD HIGHS AS NASDAQ FALLS ON FEARS OF AN AI BUBBLE

Wall Street faces a new internal fracture as investors recalibrate their strategies. The session reflects a market divided and undergoing rapid reconfiguration.

The gap between the major U.S. stock indexes widened again this week, amid mixed signals from the Federal Reserve, a persistent rotation into cyclical stocks, and renewed anxiety over a potential artificial intelligence bubble. While the Dow Jones Industrial Average moves toward record highs, the Nasdaq Composite and the Nasdaq 100 are retreating, once again testing confidence in the technology sector.

The Federal Reserve’s latest rate cut  which set the benchmark between 3.5% and 3.75% reshaped capital flows. The move, widely anticipated, coincided with internal warnings from the central bank about a cooling labor market and a possible pause in its expansionary stance. Fed Chair Jerome Powell said job growth “has likely turned negative,” a signal investors read as limited room for additional near-term cuts.

Monetary caution triggered a pronounced rotation out of major tech companies. The Nasdaq fell under pressure from weakness in Alphabet, Nvidia, and especially Oracle, whose shares dropped more than 10% after reporting results and forecasts seen as insufficient to sustain AI-driven expectations. Broadcom added further strain: its earnings and guidance raised fresh concerns about overheating in the sector, pushing the Nasdaq-100 lower in premarket trading.

In contrast, the Dow Jones benefited from solid inflows into traditional sectors. Visa jumped nearly 6% after a rating upgrade from Bank of America, while Nike, UnitedHealth Group, and other economically sensitive firms helped lift the index in a session that added 646 points. The performance also reflected a preference for companies less exposed to the volatility of big tech and the rising debate around AI valuations.

The S&P 500, with a more diversified composition, showed a middle-ground performance: an early dip followed by attempts to break upward. Analysts point to the 6,800 level and the 50-day EMA as key support zones. Despite tech-sector pressure, the outlook for the index remains positive, and some traders expect it could approach 7,000 points before year-end.

Investor appetite for small-cap stocks also strengthened. The Russell 2000 rose 2.7% this week, hitting fresh record highs and expanding market breadth beyond the mega-caps.

Looking ahead to December, the Dow Jones faces several catalysts. The Fed’s final rate decision of the year, the end of quantitative tightening, and former President Donald Trump’s imminent selection of the next Fed chair could all inject additional volatility. Geopolitical uncertainty  from the war in Ukraine to tensions between Washington and Caracas  and the unpredictable possibility of a traditional “Santa Claus rally” also loom over the market.

For now, the market bias remains moderately bullish. But the widening divergence between indexes  and the persistent shadow of an AI bubble  suggests that year-end stability will hinge on labor data and investor sentiment toward a technology sector once again under scrutiny.