Wall Street in Freefall: Is This the Start of a Major Correction?
- Why Is Wall Street Plunging?
- How Bad Are the Market Losses?
- What's Happening With Tesla and Elon Musk?
- How Is the AI Sector Impacting Markets?
- What's the Fed's Next Move?
- Supreme Court Showdown Over Trump Tariffs
- Key Earnings Reports Moving Markets
- Commodities and Crypto Update
- China's Rare Earth Gambit
- Frequently Asked Questions
Wall Street continues its downward spiral this Friday, extending losses from yesterday's AI sector-led correction as investors question sky-high valuations and funding challenges for key players like OpenAI. With a historic government shutdown adding to the gloom, the S&P 500 dropped another 1.01% to 6,653 points, while the Dow Jones fell 0.41% to 46,720 points and the Nasdaq plunged 1.59% to 22,688 points, dragging down tech giants like Nvidia and Tesla. This article breaks down the market turmoil, Tesla's shocking $1 trillion compensation package for Elon Musk, the AI valuation debate, and crucial developments from the Fed to the Supreme Court.
Why Is Wall Street Plunging?
The selloff gained momentum after mixed quarterly earnings reports and growing skepticism about AI valuations. Market participants are particularly concerned about OpenAI's massive projected $1.4 trillion spending commitments over the next eight years, despite the company remaining unprofitable. The prolonged government shutdown - now at 37 days - continues to weigh on market sentiment, with WHITE House economic advisor Kevin Hassett warning it could permanently damage government efficiency.
How Bad Are the Market Losses?
Friday's declines compound Thursday's correction:
- S&P 500: -1.01% (6,653 pts)
- Dow Jones: -0.41% (46,720 pts)
- Nasdaq: -1.59% (22,688 pts)
What's Happening With Tesla and Elon Musk?
In a stunning development, Tesla shareholders approved a record compensation package for CEO Elon Musk that could ultimately be worth $1 trillion. The plan grants Musk up to 12% additional Tesla shares (he currently owns 13%) if the company achieves an $8.5 trillion market cap - more than six times its current valuation - along with ambitious operational targets including:
- 20 million Tesla EVs delivered
- 10 million Full Self-Driving subscriptions
- 1 million robotaxis in commercial service
- $400 billion in adjusted EBITDA
How Is the AI Sector Impacting Markets?
The AI boom shows signs of strain as investors question sustainability:
- OpenAI CEO Sam Altman denied seeking government guarantees for its data centers despite anticipating $1.4 trillion in commitments
- Nvidia faces new restrictions on AI chip sales to China, with the White House reportedly blocking its latest China-adapted B30A chip
- October saw 153,000 job cuts announced (+175% YoY), with AI disruption cited as a major factor
What's the Fed's Next Move?
Markets now price in a 70.4% chance of a December 10 rate cut (per CME FedWatch), which WOULD lower the fed funds rate to 3.50-3.75%. New York Fed President John Williams hinted the central bank may soon resume bond purchases to maintain liquidity, though he stressed this wouldn't represent quantitative easing or a policy shift. Vice Chair Philip Jefferson supported the recent rate cut due to labor market concerns but advocated moving cautiously toward neutral policy.
Supreme Court Showdown Over Trump Tariffs
The Supreme Court heard arguments Wednesday about the legality of Trump-era tariffs, with most justices appearing skeptical of the administration's claims to unlimited tariff powers under the IEEPA law. A ruling isn't expected for weeks, but the case (Learning Resources, Inc. v. Trump) could have far-reaching implications for presidential trade authority.
Key Earnings Reports Moving Markets
| Company | Performance | Key Details |
|---|---|---|
| Airbnb | -1.1% | Q3 revenue $4.1B (+10% YoY), guides for 7-10% Q4 growth |
| Monster Beverage | +7.5% | Record Q3 revenue $2.2B (+17% YoY), EPS $0.56 beats |
| Take-Two | -8.3% | Delays GTA 6 to November 2026, Q2 loss $134M |
| Expedia | +17.8% | Q3 EPS $7.57 beats, bookings +12%, raises guidance |
Commodities and Crypto Update
WTI crude rose 0.4% to $59.70/barrel while gold approached $4,000/oz. bitcoin remains under pressure near the psychologically important $100,000 level. The dollar index fell 0.3% against a basket of currencies.
China's Rare Earth Gambit
China is preparing a new rare earth export license system that could ease some restrictions, though Reuters reports a full lifting of April's export controls appears unlikely. Rare earths have become Beijing's most powerful leverage in its trade war with Washington.
Frequently Asked Questions
How long has the government shutdown lasted?
The current U.S. government shutdown has lasted 37 days as of November 2025, making it the longest in history.
What are the key targets in Elon Musk's compensation plan?
Musk's $1 trillion compensation package requires Tesla to hit 12 market cap milestones from $2 trillion to $8.5 trillion along with operational targets like delivering 20 million EVs and achieving $400 billion EBITDA.
Why is Nvidia struggling in China?
The White House has reportedly blocked Nvidia from selling its latest AI chips to China over national security concerns, despite the company developing China-specific versions like the B30A chip.
When might the Fed cut rates next?
Markets currently price in a 70.4% probability of a rate cut at the Fed's December 10 meeting, which would be the final policy decision of 2025.
