Why are stocks falling and what should investors do? Experts explain

10:26 Traders work at the New York Stock Exchange (NYSE) in New York, November 17, 2025. Brendan Mcdermid/Reuters

Stocks fell on Monday, extending an intraday slide that presents a dilemma: Should investors buy cash at bargain prices or unload for fear of the worst?

The tech-heavy Nasdaq plunged 3% last week, the index’s biggest weekly drop since the fallout from President Donald Trump’s “Deliverance Day” tariffs in April. The S&P 500 fell up 1.6% over the period, ending three consecutive weeks of gains.

The trade marks a rare wave of turbulence on this year’s path to higher returns. Even after the losses, the S&P 500 continues to grow by 15% in 2025. While the Dow Jones Industrial Average rose 11% and the Nasdaq soared 19%.

According to analysts, two main culprits are responsible for the decline: growing skepticism about the artificial intelligence technology that underpins the market’s growth, and the realization that the Federal Reserve may keep interest rates high for longer than many investors previously expected.

However, analysts added that the decline was more likely to be a blip than a prolonged downturn, even as they acknowledged uncertainty about the way forward for the US economy.

“The market is taking a more sober view,” Steve Sosnick, chief strategist at trading firm Interactive Brokers, told ABC News, noting that Wall Street has cleared previous hurdles to further gains. “Maybe the glass isn’t always half full.”

The latest market decline has coincided with concerns about the reliance of tech giants on artificial intelligence, which make up a disproportionately large share of the S&P 500. As big tech companies spend hundreds of billions building the data centers needed to run the energy-intensive technology, the financial benefits remain uncertain.

The market’s gains this year have been concentrated in a handful of tech giants known as the Magnificent Seven: Alphabet, Amazon, Apple, Meta, Microsoft, Tesla and Nvidia. Concerns about artificial intelligence have weighed on stocks in recent days, causing their prices to fluctuate, according to some analysts.

NVIDIA CEO Jensen Huang presents the Industrial AI Cloud project during a press conference in Berlin, Germany, November 4, 2025. Lisi Niesner/Reuters

“There’s a recognition that if they’re going to spend all that money on data centers, it’s going to put a strain on their And right now, it’s unclear how profitable those investments will be,” Ed Yardeni, president of consulting firm Yardeni Research and former chief investment strategist for Deutsche Bank’s equities division, told ABC News.

Investors also believe that the likelihood of an interest rate cut at next month’s Fed meeting will decrease.

Traders put the odds of a quarter-point rate cut next month at about 41%, down significantly from two weeks ago, according to CME’s FedWatch Tool, a market sentiment gauge.

The Fed cut its benchmark interest rate at last month’s meeting, and policymakers had forecast an additional quarter-point cut in December. But persistent inflation has prompted some Fed officials to express caution about further interest rate cuts. Prices rose 3% in September from a year earlier, leaving inflation one percentage point above the Fed’s target rate.

The prospect of lower interest rates usually boosts the stock market, as the promise of cheaper borrowing means a potential boon for firms and their investors. But the opposite is also true, analysts say: When hope for a rate cut fades, stocks can fall.

“With more uncertainty comes more volatility — and that’s exactly what we’ve seen so far in November,” Bret Kenwell, an investment analyst at eToro, told ABC News, citing interest rate expectations as well as a potential Supreme Court ruling that could overturn much of Trump’s tariff policy.

While acknowledging recent tensions, analysts expressed confidence about the way forward.

Ivan Feinseth, market analyst at Tigress Financial, said the S&P 500 will end the calendar year with a rise from current levels of around 6,700 to 7,000.

Feinseth attributed his optimism to expectations of continued AI adoption, as well as a robust productivity economy.

Although hiring has slowed in recent months, the U.S. economy has continued to create jobs and maintain solid economic growth.

“Sometimes the market gets ahead of itself and everyone panics,” Feinseth said. “But I still think the market dynamics are positive.”

Source: abcnews.go.com