NEW YORK, Nov 28 (Reuters) – Investors are turning their attention to the financial viability of artificial intelligence ventures and broader economic indicators in the week ahead, as U.S. equity markets seek stability. n nMarket participants anticipate continued sensitivity in stock performance, especially after concerns over inflated valuations tempered some of the momentum that drove gains earlier in the year. n n”The assumption that AI firms will quickly generate profits is now being challenged,” said Matthew Maley, chief market strategist at Miller Tabak. “If this skepticism grows through December, it could weigh heavily on investor sentiment.” n nA key concern for traders is the potential decline in risk appetite, illustrated by the recent drop in bitcoin’s value. The cryptocurrency has fallen below $90,000 from a peak above $125,000 in early October. n n”Bitcoin often reflects broader market risk tolerance, so its movement is being watched closely,” noted King Lip, chief strategist at BakerAvenue Wealth Management. n nTechnology shares have underperformed amid uncertainty about returns from large-scale investments in AI infrastructure. Wall Street is also assessing the implications of increased corporate borrowing by major tech firms funding their AI initiatives. n n”There’s growing scrutiny over how soon these massive outlays will translate into actual earnings,” said Paul Nolte, senior wealth adviser at Murphy & Sylvest Wealth Management. n nAlphabet has drawn particular attention, having reversed earlier perceptions of lagging in AI development. Its stock has surged in recent months, lifting its market capitalization to approximately $4 trillion. n nEconomic data will be crucial in shaping investor outlook. Reports on post-Black Friday and Cyber Monday consumer spending may offer early insights into holiday demand. However, many key economic indicators remain delayed due to the 43-day U.S. government shutdown that concluded earlier this month. n nAccording to Anthony Saglimbene, chief market strategist at Ameriprise Financial, a clearer picture of the economy may not emerge until January, when backlogged data is released. n n”Markets will have to navigate this uncertainty through year-end,” Saglimbene remarked. n nDespite the lack of clarity, expectations for a Federal Reserve rate cut at its December 9-10 meeting have strengthened. Comments from several Fed officials suggesting openness to easing policy have influenced trader positioning. n nAs of late Wednesday, Fed funds futures indicated more than 80% probability of a 25-basis-point reduction, up from roughly 50% the previous week, according to CME FedWatch. n nFurther monetary easing could broaden market participation beyond the tech-heavy gains seen in 2023. Smaller-company stocks, which tend to benefit from lower rates, have shown relative strength recently. n n”What I’m monitoring is whether a Fed rate cut can spark stronger performance in sectors outside technology,” Saglimbene added. n nReporting by Lewis Krauskopf; Editing by Alden Bentley and Rod Nickel
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Wall St Week Ahead: Investors on watch for AI, economic updates as US stocks steady
NEW YORK, Nov 28 (Reuters) – Investors will look in the coming week for signals about profitability for artificial intelligence companies, as well as the broader economy ‘s health, to steady the U.S. equity market. n nSign up here. n nEquities are poised to maintain this sensitivity, investors said, after concerns about overheated valuations took some of the steam out of a trade that has propelled markets higher this year. n n”The narrative surrounding the profitability of AI is coming under question,” said Matthew Maley, chief market strategist at Miller Tabak. “If that becomes a bigger issue as we move through December, that ‘s going to be a big problem for the market.” n nWATCHING FOR SIGNS OF RISK APPETITE WANING n nHowever, investors are wary of signs of waning risk appetite. Among them is the slide in bitcoin , which in recent days has dropped below $90,000 from over $125,000 in early October. n n”Bitcoin serves as a risk proxy for equities, so we ‘ll be monitoring it closely,” said King Lip, chief strategist at BakerAvenue Wealth Management. n nTechnology stocks have weighed on indexes as questions emerge about the timing of returns on massive spending investments in AI infrastructure. Wall Street was also watching fallout from a rush of debt issuance by major tech companies to fund their AI expansions. n n”Investors are starting to rethink how quickly some of this … is going to have an impact on bottom lines,” said Paul Nolte, senior wealth adviser and market strategist at Murphy & Sylvest Wealth Management. n nInvestors ‘ spotlight this week fell particularly on Alphabet, which had been seen as an AI laggard but whose shares have soared in recent months, pushing its market value up to around $4 trillion. n nECONOMY IN FOCUS n nInvestors will be eager for any clues about the economic backdrop from those reports, as well as from early indications about holiday consumer spending following Black Friday and Cyber Monday retail sales events. n nMany of the data releases that investors rely on to gauge the economy ‘s health have been delayed or canceled due to the 43-day U.S. government shutdown that ended this month. n nIt may not be until releases arrive in January that investors get a more complete view of the economy, said Anthony Saglimbene, chief market strategist at Ameriprise Financial. n n”Investors are going to have to deal with this fog … through year-end,” Saglimbene said. n nDespite the cloudy economic picture, traders have increased bets the Federal Reserve will cut rates at its December 9-10 meeting following comments from several central bank officials indicating willingness to ease policy. n nFed funds futures late on Wednesday reflected over 80% odds that the central bank will cut by another quarter percentage point at the meeting, according to CME FedWatch, after such odds showed roughly a coin flip last week. n nProspects of more monetary easing could benefit broader parts of the market beyond the tech and AI stocks that have dominated this year. For example, rate-sensitive shares of smaller companies have outperformed in recent days. n n”What I ‘m watching is through year-end if we do see the Fed cut rates, can we see more positive momentum in other areas outside of technology?” Saglimbene said. n nReporting by Lewis Krauskopf; Editing by Alden Bentley and Rod Nickel