Breaking the Correction: Dip Buyers Return as AI Stocks Lead Market Rebound

The prospects of an end to the government shutdown have broken the recent correction, where the NASDAQ had its worst week since April.
The apparent overvaluation concerns of AI names have been reversed in a big way, with the Magnificent 7 up 2.5%, led by +4.7%, and semiconductors up 2.9%. , whose sharp correction after earnings beats which started the dominoes of AI-related corrections, is up 8.5% today.
The bounce is as narrow as the fall was, where the market-weighted S&P is up 1.2% this morning, while the even-weighted S&P is up only 0.1%. For the trailing week, this leaves the market weight S&P down 0.3%, the even weight +1.1%, for the trailing month, market weight + 2.5%, even weight +0.7%. Another demonstration of the record high weight of Mega Tech in the major indexes. The VIX remains elevated at 18.1, but well off the +22 we saw last week.
We are also seeing upward volatility in precious metals, where gold soared over $100/oz, almost hitting $4,115/oz before pulling back to $4,095. Silver gapped up to $50.1/oz, +$2/oz before pulling back to $49.0/oz. Copper has ground back above $5/oz. remains below $60/bbl, flat on the day. Natural gas is holding on to $4.3/mcf, still up 36% for the trailing month. Crypto has rebounded with Bitcoin jumping from Friday’s close of $103.7K to $106.6K before pulling back to $105.5K.
Interest rates remain persistently high. The US 2-year is up 2bps to 3.57%, the 10-year is flat at 4.1%. Bets for a December cut are modestly lower at 60%, and a further cut in January at 25%. The US dollar index is flat at 99.5. In an interesting development, the Trump administration is proposing a 50-year home mortgage loan program to make buying a home more affordable.
It’s a tech/ AI recovery day. A broader market recovery will likely take an official end to the government shutdown and may depend somewhat on the details of the terms that get it done. For now, the recovery in AI names by dip buyers is an important move due to the strong influence on major indexes.