The strong stock market rally of the last few days brought the S&P 500 within striking distance of its previous record. This reaction brought investors' attention back to the index's performance and the signals from the Federal Reserve, factors that are shaping the market's direction at the start of the holiday season. Friday's session was shortened due to the Thanksgiving holiday. Even so, the S&P 500 advanced 0.5% and closed at 6,849 points. It remained just 42 points below the high reached on October 28. The Dow Jones gained 0.6% and closed at 47,716 points. The Nasdaq rose 0.7% on the day, although it ended November with a monthly decline of 1.5% due to pressure on some of the major technology companies. The five-day upward movement helped erase almost all the losses accumulated in the first weeks of the month. The market had been hit by volatility, especially due to concerns about a possible bubble in artificial intelligence stocks. That fear materialized with significant declines. Nvidia fell 1.8% on Friday and closed the month with double-digit losses. Oracle dropped 23% in November, and Palantir fell 16%. “The market needs to show it can sustain this momentum, but at this point, the weakness following Nvidia’s earnings report appears to be more of a short-term AI sell-off than a sign of deeper pessimism,” Chris Larkin, managing director of trading and investing at Morgan Stanley’s E*TRADE, shared in an email. The debate over a potential bubble remains open. Investors fear that expectations surrounding AI growth are inflating valuations that may not align with some companies’ fundamentals. However, not all tech stocks suffered. Alphabet stood out with a gain of nearly 14% thanks to enthusiasm for the launch of its Gemini AI model. Market sentiment also improved due to increasing bets on a possible rate cut by the Federal Reserve at its December 10 meeting.Recent comments from central bank officials have boosted confidence among traders. According to CME Group data, the market assigns almost an 87% probability to such a rate cut. The Fed has already cut rates twice this year to support a weakening labor market. But now it faces a dilemma. Inflation is showing signs of pressure while employment is slowing. Another cut could stimulate economic activity, but it also risks reigniting inflation. Recent corporate earnings reports were mostly positive, but economic data remains mixed. The minutes from the October meeting reveal significant divisions among policymakers. Investors also closely watched retailers for the impact of Black Friday. Macy's fell 0.3%. Kohl's gained 1.4%. Dick's Sporting Goods declined 0.5%. Among the specialists, Abercrombie & Fitch rose 2.9% and American Eagle advanced 0.7%. Meanwhile, some non-tech sectors received inflows amid market volatility. Eli Lilly and Merck rose more than 20% for the month. Travel companies like Marriott and Expedia also posted solid gains. At the same time, futures for the major indexes were temporarily suspended due to a technical issue on the Chicago Mercantile Exchange related to a failure at a CyrusOne data center. Treasury yields advanced slightly. The 10-year bond ended at 4.02%. Experts continue to voice their opinion about a possible tech bubble. If you're not familiar with this, it basically refers to the fear that the surge in tech stocks will culminate in a correction that wipes out gains. This phenomenon would signal the bursting of the bubble. However, it's difficult to predict when this might happen, if at all. This Wall Street surge always generates a directly proportional chain reaction of emotions among investors, especially beginners, who see it as an opportunity to invest without understanding the risks. The main risk: buying at the top increases the likelihood of financial loss if the market falls. Buying at the bottom is no guarantee either. If you understand this, you can remain calm at the top or on the precipice. And if you don't know, consult with advisors. You may also be interested in:Inflation is showing signs of pressure as employment slows. A further rate cut could stimulate economic activity, although it also risks reigniting inflation. Recent corporate earnings reports were mostly positive, but economic data remains mixed. The minutes from the October meeting reveal significant divisions among policymakers. Investors also closely watched retailers for the impact of Black Friday. Macy's fell 0.3%. Kohl's gained 1.4%. Dick's Sporting Goods declined 0.5%. Among specialty retailers, Abercrombie & Fitch rose 2.9% and American Eagle advanced 0.7%. Meanwhile, some non-tech sectors received inflows amid market volatility. Eli Lilly and Merck both rose more than 20% for the month. Travel companies like Marriott and Expedia also posted solid gains. Meanwhile, futures for major indexes were temporarily suspended due to a technical issue on the Chicago Mercantile Exchange related to a failure at a CyrusOne data center. Treasury yields advanced slightly. The 10-year bond finished at 4.02%. Experts continue to voice their opinion about a possible tech bubble. If you're unfamiliar with this, it essentially refers to the fear that the surge in tech stocks will culminate in a correction that wipes out gains. This phenomenon would signal the bursting of the bubble. However, it's difficult to predict when, or even if, this might happen. This Wall Street surge always generates a directly proportional emotional chain reaction among investors, especially beginners, who see it as an opportunity to invest without understanding the risks. The main risk: buying at the top increases the likelihood of financial losses if the market falls. Going down isn't a guarantee either. If you understand this, you'll be able to stay calm at the top or on the precipice. And if you don't know, get advice.

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