Wall Street staged a modest recovery Friday, November 21, erasing some of the week’s brutal losses as investors bet that Federal Reserve officials might still cut rates in December despite persistent inflation concerns. The S&P 500 rose 0.98% to 6,602.99, while the Nasdaq Composite climbed 0.88% to 22,273.08 and the Dow Jones Industrial Average gained 0.44%, though all three major averages still posted their first weekly losses in four weeks.
Friday’s session saw a broad-based relief rally with the S&P 500 rising about 1% to roughly 6,603, adding around 64 points after one of the rockiest stretches since spring. However, the bounce did little to erase concerns about artificial intelligence valuations that triggered Thursday’s stunning intraday reversal when the Dow surrendered a 700-point rally to finish sharply negative.
Even with Friday’s moves, the three major averages still posted big losses this week, with the S&P 500 finishing down about 2% week to date, as did the 30-stock Dow, while the Nasdaq shed 2.7% in the period. The weakness demonstrates that investors are reassessing sky-high valuations across AI-linked names that have powered much of 2025’s market gains.
Wall Street eyes a possible culprit in this week’s head-spinning stock market reversal: Bitcoin, with some commentators pointing to persistent worries about an AI bust while others cited the mixed September jobs report. Market veteran Ed Yardeni attributed some of Thursday’s stock market selloff to the ongoing plunge in Bitcoin’s price, noting there has been a strong correlation between the cryptocurrency and the Nasdaq-100 Index.
Bitcoin has tumbled more than 30% from earlier highs, suffering its worst slump since 2022, with the digital asset trading around $87,000 Friday and briefly touching levels not seen since April. The cryptocurrency’s collapse vindicates skeptics who warned that Bitcoin had failed to achieve its aspiration as digital gold, instead behaving as high-beta technology proxy that plunges alongside equity market weakness.
Yardeni blamed Bitcoin’s slide on the GENIUS Act, which was enacted on July 18, saying that the regulatory framework it established for stablecoins eliminated Bitcoin’s transactional role in the monetary system. The legislation created clear rules for dollar-backed digital currencies, reducing one of Bitcoin’s primary use cases and triggering the sustained selling pressure that accelerated this week.
Steve Sosnick, chief strategist at Interactive Brokers, said Bitcoin could swing the entire stock market, pointing out that it’s become a proxy for speculation, stating that as a longtime systematic trader, it tells me that algorithms are acting upon the relationship between stocks and Bitcoin. The observation that automated trading systems treat Bitcoin as leading indicator for equity market direction helps explain Thursday’s mysterious afternoon selloff that erased morning gains.
When speaking about the recent pressure, market strategist Ryan Hatfield believes that this is a normal, seasonal, post-earnings valuation pullback, adding that the bubbles portion of the market is getting annihilated. Bitcoin dropped more than 2% Friday, putting its week-to-date losses at nearly 11%, with the cryptocurrency falling to levels not seen since April as investors have pulled back on their risk-taking in the market.
Conservative investors should recognize that the violent moves in both Bitcoin and artificial intelligence stocks validate concerns that speculative excess had reached unsustainable levels. The week’s wild swings centered on AI and mega-cap tech stocks, which have led the market higher for much of 2025, with chip giant Nvidia delivering another blockbuster quarterly report with strong guidance, yet its stock fell about 3% on Thursday and another 1% on Friday, leaving it down nearly 6% for the week.
Investors appear to be asking a painful question: How much good news is already in the price? Oracle has become something of a cautionary tale, with after a massive debt-funded push to build AI-ready data centers, the stock has slid more than 40% from its recent peak and dropped another roughly 5-6% on Friday alone, making it one of the worst performers in the S&P 500 that day.
A detailed Reuters analysis notes that the largest bout of volatility in months has exposed cracks in the AI-driven rally, with many AI-linked stocks having failed to hold gains even after strong earnings. The inability of stellar quarterly results to prevent selling suggests that valuations have reached levels where even excellent execution cannot justify current prices.
Eli Lilly’s market cap briefly crossed $1 trillion in value on Friday, becoming the first drugmaker to earn this distinction, with the diabetes and obesity drugmaker having flirted with the trillion-dollar mark in September 2024 before hitting a few stumbling blocks. Now on firmer footing, Lilly shares have outpaced the S&P 500 year to date, with a nearly 36% gain.
The healthcare company’s achievement demonstrates that trillion-dollar valuations are no longer exclusive to technology giants, though conservatives note that Eli Lilly reached this milestone through developing drugs that address genuine medical needs rather than speculative artificial intelligence promises. The company’s weight-loss medications Mounjaro and Zepbound have created enormous shareholder value by solving real problems rather than depending on distant projections about future AI applications.
Friday’s macro backdrop was not entirely comforting, with a flash November PMI report from S&P Global showing that US manufacturing activity slowed to a four-month low, with the index falling to 51.9 from 52.5 in October. New orders weakened noticeably, signaling softer demand, with inventories of finished goods hitting their highest level on record in the survey, suggesting products are piling up on shelves and in warehouses.
Firms continued to cite higher costs tied to tariffs as a major headwind, while at the same time, the University of Michigan consumer survey showed ongoing frustration with high prices and weak real incomes, especially among lower- and middle-income households. The combination of weakening demand and elevated costs creates challenging environment for corporate profit margins heading into 2026.
Lower yields helped fuel a risk-on bounce in stocks after Thursday’s brutal reversal, when the market swung from a huge early gain to a deep loss in its biggest intraday flip since April. However, Friday’s modest recovery did little to repair technical damage from the week’s volatility, with the S&P 500’s breach of its 50-day moving average Monday representing significant deterioration.
The question facing investors as Thanksgiving week begins is whether Friday’s bounce represents the beginning of year-end recovery or merely temporary respite before additional selling extends the correction. The only real question is, where do we bottom out at? market strategist Hatfield said about the broader market, acknowledging uncertainty about whether current levels represent attractive entry points or early stages of more serious decline.
As markets prepare for shortened holiday trading with Thanksgiving Thursday and early close Friday, the convergence of thin liquidity, uncertain Federal Reserve policy, and mounting evidence that artificial intelligence valuations have reached bubble levels creates treacherous environment. Conservative portfolio managers who maintained discipline rather than chasing recent rallies should find opportunities to add exposure selectively if the correction extends, while those fully invested face difficult decisions about whether to reduce risk ahead of December’s policy meeting that could determine market direction through year-end.
