Wall Street Roiled: Fed Warning Cools Rally as AI Frenzy Ignites Stocks and Crash Fears

Key Facts (Sept. 23–24, 2025)

Record Rally Pauses: U.S. stocks snapped a three-day streak of all-time highs on Tuesday as Federal Reserve Chair Jerome Powell struck a cautious tone, warning that asset prices look “fairly highly valued” and giving little hint of when rates might be cut ^[1] ^[2]. The Dow fell 0.2%, S&P 500 0.6%, and Nasdaq 0.9% ^[3], before indexes steadied Wednesday with only slight gains ^[4].
Fed Tightrope & Market Jitters: Powell emphasized the Fed must “walk a tightrope” balancing inflation risks against a softening job market ^[5]. His remarks – the first since last week’s rate cut – tempered investor optimism. “The market was caught off guard by Powell’s stock valuation comments… perhaps the Fed is concerned about elevated asset prices,” noted Thomas Hayes of Great Hill Capital ^[6]. Traders are now cautiously eyeing upcoming data (the Fed’s preferred PCE inflation gauge due Friday) for clues on policy ^[7].
Shutdown Showdown: Political drama in Washington added to market uncertainty. President Donald Trump abruptly canceled budget talks with Democratic leaders, raising the risk of a partial U.S. government shutdown on Oct. 1 if no funding deal is reached ^[8]. Lawmakers are sparring over spending levels, and the brinkmanship could furlough hundreds of thousands of workers if a stopgap isn’t passed ^[9] ^[10].
Tech Stocks Whipsaw: The high-flying tech sector saw mixed fortunes. Nvidia – a key driver of the recent AI-fueled rally – tumbled about 3% Tuesday after a big run-up, as Powell’s comments and profit-taking hit growth stocks ^[11]. In contrast, Alibaba’s U.S.-listed shares surged ~9% on Wednesday after the Chinese tech giant unveiled a major AI push, including a new partnership with Nvidia and plans for its largest-ever global data center expansion ^[12] ^[13]. “The speed of AI development has far exceeded our expectations,” Alibaba CEO Eddie Wu said, as the company pledged to boost its already massive $53 billion AI investment plan ^[14].
Stocks Skyrocket on Big News:Lithium Americas nearly doubled in value, soaring 89% at one point, after a Reuters report that the Trump administration is in talks to take a 10% stake in the lithium producer to secure EV battery materials ^[15]. The news also lifted its partners and peers – General Motors (which owns 38% of a Lithium Americas mine) jumped ~2%, and other lithium miners like Albemarle climbed ~5% ^[16] ^[17]. Meanwhile, Boeing shares rose ~2% Tuesday after landing an $8 billion jet order from Uzbekistan Airways and signals of renewed aircraft demand from China ^[18].
Energy Leads as Oil Rallies: Oil prices hit three-week highs, with Brent crude topping $68.5 (+1.4%) on Wednesday, after U.S. crude inventories unexpectedly fell and conflict risks threatened supply ^[19]. The S&P 500 energy sector jumped ~1.5% in response ^[20]. At the same time, copper miner Freeport-McMoRan plunged over 10%, the S&P’s biggest decliner, after warning its third-quarter copper and gold sales will be lower than expected ^[21] – a stark reminder of uneven demand in commodities.
Corporate Shake-Ups and Deals: Investors digested a raft of corporate moves. Oracle stock slid ~3% after reports the company plans a $15 billion bond sale, adding debt for its expansion ^[22]. Adobe sank 3.1% when Morgan Stanley cut its rating on growth concerns ^[23]. But others got a boost: cloud firm ServiceNow jumped 2.9% on an upbeat analyst upgrade ^[24], and chipmaker Marvell Technology rose nearly 4% after unveiling a $5 billion stock buyback program ^[25]. In major M&A, utility giant Sempra Energy agreed to sell a 45% stake in its infrastructure unit to a KKR-led group for $10 billion – a deal aimed at funding its clean energy projects – sending Sempra shares up over 4% to a seven-month high ^[26] ^[27].
Bull vs Bear Debate: Market experts are starkly divided on what comes next. A famed “black swan” hedge fund, Universa, predicted stocks could surge another 20% in a final “euphoric blow-off rally” – only to crash 80% in a 1929-style collapse once the economy buckles under high interest rates ^[28] ^[29]. “I’d argue we’re in the middle of that rally now, not at the end,” warned Universa’s CIO Mark Spitznagel ^[30]. In contrast, other analysts see pullbacks as buying opportunities given a resilient economy. “So many managers that sold in April are still behind benchmarks, so any weakness has to be bought,” contended Thomas Hayes, reflecting a FOMO mentality still underpinning the market ^[31].

Finance & Economy: Fed Caution and Fiscal Feuds

Wall Street’s rally hit a speed bump as the Federal Reserve signaled it won’t rush to ease policy. On Tuesday, Fed Chair Jerome Powell struck a delicate balance: he noted the central bank must “balance inflation concerns with a weakening job market” when considering future rate moves ^[32]. Importantly for investors, Powell offered no clues on the timing or size of the next interest-rate cut ^[33]. (The Fed had only just cut rates last week for the first time this year, after a string of increases.) His cautious stance – and his remark that equity valuations are “fairly highly valued” – immediately cooled the market’s exuberance ^[34]. The major indexes, which had all notched record highs in the prior three sessions, pulled back modestly on Tuesday ^[35].

Traders initially reacted negatively to Powell’s tone. “The big event of the day was Powell’s speech… he left the door open for another cut but gave really no hint of when, and the market began to sell off on that,” said Peter Cardillo of Spartan Capital ^[36]. Some profit-taking was to be expected after such a strong run – as Cardillo noted, stocks were “ripe for a pullback” ^[37]. By Wednesday, however, stocks stabilized as investors digested the Fed’s message. The Dow and S&P 500 ticked up only about 0.1% by midday Wednesday ^[38], essentially flat, while the Nasdaq was just +0.07% ^[39]. This choppy, “subdued” trading reflected a market treading carefully in the wake of Powell’s comments ^[40].

On the economic front, Fed officials presented mixed signals. Powell’s colleagues voiced divergent views – with at least one dovish voice, Fed Vice Chair Michelle Bowman, arguing the Fed should “downplay…persistent inflation” and commit to rate cuts to support jobs ^[41]. But others on the Fed have warned inflation isn’t yet vanquished. Powell himself emphasized the “tightrope” the Fed is walking: inflation is still above target even as the labor market shows signs of softening ^[42]. This divided messaging has made investors more cautious. Bond yields have stayed elevated (the 10-year Treasury lingered near multi-year highs), and the U.S. dollar strengthened, which in turn pushed gold prices lower ^[43] as traders reassessed the odds of rapid rate cuts. All of this suggests the era of easy money is not returning as quickly as bulls had hoped.

Meanwhile, a looming showdown in Washington added to the Wall Street jitters. Budget negotiations broke down as President Trump canceled a meeting with congressional Democrats on Tuesday, in a dispute over government funding ^[44]. With the federal budget year ending Sept. 30, the surprise cancellation heightened the risk of a government shutdown beginning next week ^[45]. The Republican-led House and Democratic Senate are at odds over spending, and stopgap funding bills have stalled amid political brinkmanship ^[46]. Trump wrote on social media that “no meeting… could possibly be productive,” blaming Democrats for the impasse ^[47], while Democrats in turn accused Trump’s side of “holding America hostage” ^[48].

Wall Street typically dislikes Washington dysfunction, and a shutdown could sap economic momentum if it drags on (by pausing federal services, paychecks, and contracts). Thus far, the market impact has been muted – perhaps because investors have seen similar standoffs resolved at the 11th hour many times before. But analysts warn a prolonged shutdown would start to hit confidence. Some are putting the odds of a shutdown at about one-in-three ^[49]. This political uncertainty, combined with the Fed’s guarded stance, has introduced a note of caution into what had been a “relentless rally” up to this week ^[50].

Despite these concerns, many on Wall Street remain focused on the resilient U.S. economy. Recent data on jobs and spending have been solid, and no recession signs are flashing immediately. This backdrop explains why, even after Powell’s valuation warning, dips have been shallow. “So many managers…are still behind their benchmarks, so any weakness has to be bought,” observed Thomas Hayes, suggesting underperforming funds are seizing any chance to catch up ^[51]. Indeed, by Wednesday afternoon U.S. stocks were already firming again, as traders looked ahead to Friday’s core PCE inflation report (the Fed’s preferred gauge) and hoped for signs of cooling prices that could justify future rate relief ^[52]. In short, the tug-of-war between Fed caution and FOMO (fear of missing out) among investors is defining the market’s mood going into the end of the week.

Technology: AI Hype vs. Tech Tumbles

High-tech stocks have been at the center of the market’s recent surge, and this week they delivered both spectacular gains and sharp pullbacks. The biggest buzz came from China: Alibaba Group unleashed a flurry of major AI announcements at its annual cloud conference, igniting what one analyst called a “full-throttle AI frenzy” in tech shares. On Wednesday, Alibaba’s Hong Kong stock soared 9.7% to a four-year high ^[53], and its U.S.-listed shares jumped similarly – nearly 10% in pre-market trading ^[54] – after the e-commerce titan revealed a sweeping plan to double down on artificial intelligence. Alibaba unveiled its most powerful AI model yet (the Qwen3-Max with over a trillion parameters) and new AI products, and announced it will partner with Nvidia to develop cutting-edge “physical” AI capabilities for training and simulation ^[55] ^[56]. Crucially, Alibaba also detailed a global expansion of its data centers – opening facilities from Brazil to the Netherlands – to bolster its cloud infrastructure for AI ^[57].

The company’s CEO, Eddie Wu, underscored the strategic shift, noting “the speed of AI industry development has far exceeded our expectations” and pledging to increase Alibaba’s AI spending beyond the hefty ¥380 billion ($53 billion) already slated for the next three years ^[58]. Investors cheered this aggressive investment in Alibaba’s AI future – interpreting it as a sign the company intends to rival global peers in the AI arms race. The enthusiasm spilled over to other Chinese tech names and the broader tech sector, reinforcing the market’s view that AI is a core driver of growth.

On the other hand, U.S. tech giants that had powered the recent rally took a breather. Notably, shares of Nvidia (NVDA) – the chipmaker at the heart of the AI boom – fell 2.8% Tuesday, weighing on the Nasdaq ^[59]. This drop came after Nvidia’s stock had surged on Monday when it announced a landmark deal to invest up to $100 billion in OpenAI (maker of ChatGPT) and supply it with advanced chips ^[60]. The whiplash for Nvidia – soaring one day, sliding the next – shows how sensitive these stocks are to sentiment. By Tuesday, some traders likely locked in profits, and Powell’s caution on high valuations added to the pressure on richly-valued tech names. Amazon.com, Microsoft, and Apple all declined modestly on Tuesday as well ^[61]. As one analyst quipped, “trees don’t grow to the sky” – even the AI darlings need to pause now and then.

Chipmakers and cloud firms delivered a mixed bag of news. Memory chip leader Micron Technology reported its quarterly earnings after Tuesday’s close and issued an upbeat forecast, citing improving demand for its chips ^[62]. Micron’s stock actually rose 1.1% during Tuesday’s regular session ahead of the results ^[63], and in after-hours trading the stock ticked higher on the rosy outlook ^[64]. But by Wednesday, that optimism fizzled – Micron shares fell 1.7% as the trading day wore on ^[65]. The quick reversal suggests investors remain cautious about the semiconductor cycle, worrying that any rebound in memory demand could be tentative.

Other big movers in tech included software and semiconductor names reacting to analyst actions. Adobe, the creative software maker, saw its stock plunge 3.1% after Morgan Stanley downgraded it, citing the stock’s lofty valuation and limited near-term catalysts ^[66]. Oracle shares slipped nearly 3% as well, after reports emerged that the enterprise software giant is looking to raise $15 billion in a bond sale to fund its expansion ^[67]. The prospect of substantial new debt gave some investors pause. In contrast, a couple of companies got tailwinds from bullish calls: ServiceNow, a cloud workflow software firm, leapt almost 3% after Morgan Stanley upgraded it, expressing confidence in its growth runway ^[68]. And chip designer Marvell Technology rallied about 3.9% upon announcing a $5 billion stock buyback, a shareholder-friendly move signaling management’s confidence in the business ^[69].

It wasn’t just enterprise tech – consumer-tech and auto stocks saw action too. Tesla shares accelerated nearly 3% by midday Wednesday, reaching their highest levels of 2025. The EV maker got a boost as Mizuho Securities raised its price target for Tesla, citing a brighter 2026 outlook and easing concerns over tariffs and supply chains. Tesla’s strength helped power the consumer discretionary sector up +0.8% ^[70]. Amazon also contributed to that sector’s gains: the e-commerce and cloud titan’s stock climbed ~0.7% Wednesday after Wells Fargo upgraded Amazon to “overweight,” praising the company’s improving profit trends in e-commerce and the continued growth of AWS (its cloud division) ^[71]. Together, Tesla and Amazon’s resurgence showed that investor appetite remains strong for megacap names when there’s positive news. By Wednesday’s end, the tech-heavy Nasdaq had largely shaken off Powell’s scare, buoyed by the AI euphoria from Alibaba and selective optimism from analyst calls.

Energy & Commodities: Oil Gushes, Lithium Strikes Gold

Energy markets flexed their muscle mid-week, boosting one of the stock market’s lagging sectors. Oil prices jumped roughly 1% to multi-week highs, extending a steady upward trend. By late Wednesday morning, benchmark Brent crude traded near $68.57 per barrel, the highest since early September ^[72], while U.S. WTI crude rose to about $64.4 ^[73]. The catalyst was a surprise drop in U.S. crude inventories – stockpiles fell by ~600,000 barrels last week, versus an expected increase, indicating stronger demand or tighter supply than anticipated ^[74] ^[75]. That bullish inventory report added to existing supply worries: traders are on edge over export disruptions in places like Iraq and Venezuela, and fresh geopolitical risks after Ukraine attacked Russian oil facilities ^[76]. Together, these factors fueled a sense that the oil market could tighten heading into year-end.

For the stock market, rising oil was good news for oil companies. The Energy sector became Wednesday’s top performer – the S&P 500 energy index gained about +1.5% ^[77]. Oil majors and drillers saw broad gains as higher crude prices promise improved revenues. Industry leaders ExxonMobil and Chevron both advanced (each has recently been hovering around multi-year highs on optimism about oil demand). Refiners and oilfield service firms also got a lift. The renewed strength in energy shares marks a turnaround from earlier this year, when recession fears had weighed on oil. Now, with crude on track for its highest monthly close in over three months ^[78], investors appear more confident in the earnings power of energy companies.

However, not all commodity-related news was rosy. Freeport-McMoRan, a major copper and gold miner, stunned the market with a negative update that sent its stock into a tailspin. Freeport warned that its third-quarter sales volumes for copper and gold will come in lower than previously expected ^[79]. The forecast cut, which the company disclosed as part of an operations update, implies weaker demand or production issues in the quarter. Copper is often seen as an economic bellwether, so any hiccup can spook investors. Freeport’s shares plunged 10.5%, making it the worst performer in the S&P 500 ^[80]. The sharp drop shows how unforgiving the market can be: Freeport is now down despite copper prices themselves being relatively firm. It suggests concerns about future demand in China or other key markets for industrial metals. Some analysts noted that if China’s economy (a huge copper consumer) remains sluggish, mining companies could face more headwinds.

On the flip side, an eye-popping rally in lithium stocks proved that not all metals are equal. Lithium Americas Corp became an overnight market sensation after a scoop that President Trump’s administration is exploring an equity investment in the company. Late Tuesday, Reuters reported that U.S. officials are in talks to potentially take up to a 10% stake in Lithium Americas ^[81]. The strategic aim: secure domestic supplies of lithium – a critical metal for electric vehicle batteries – by supporting the company’s huge Thacker Pass lithium project in Nevada ^[82]. This unprecedented move (essentially the government acting as an investor in a private enterprise) electrified the market. Lithium Americas’ New York-listed shares rocketed between 70–90% higher in volatile trading as traders piled in ^[83] ^[84]. The stock was up over 67% at $5.13 before the opening bell Wednesday, an astonishing one-day jump for a mid-cap company ^[85].

Analysts said the news is a game-changer for the EV materials space. “Markets can view equity stakes as a leading indicator of favorable return on invested capital… the incentive for taking equity stakes seems significantly higher than withdrawing funding,” wrote Jefferies in a note, interpreting the government’s interest as extremely bullish ^[86]. In other words, an investment by Uncle Sam signals confidence that Lithium Americas’ projects will pay off, rather than the feds simply giving loans or subsidies. The development also lifted the entire lithium mining industry. U.S.-traded shares of Chile’s SQM and other lithium producers jumped 3–5% on the prospect of stronger U.S. support for domestic battery supply chains ^[87].

Notably, General Motors (GM) got a piece of the action too. GM has a strategic agreement with Lithium Americas – it invested in the Thacker Pass mine earlier and owns about 38% of the project ^[88]. With Washington potentially stepping in, the venture’s future looks more secure. GM’s stock climbed ~2.4% Wednesday ^[89], helped also by news that UBS upgraded GM to a “buy” rating on the automaker’s EV strategy ^[90]. The idea that the U.S. government might directly back an EV battery raw material supplier is virtually unprecedented, and it underscores how critical minerals have become a national security priority. It’s not just lithium either – the report noted Trump officials have also discussed taking stakes in Intel (semiconductors) and MP Materials (rare-earth minerals) as part of a broader effort to reshore high-tech supply chains ^[91]. For markets, this trend means certain companies could enjoy tailwinds from government support, adding a new dimension to investment decisions.

All told, the commodities arena was a study in contrasts: Oil’s steady climb benefited the traditional energy players, industrial metals sent mixed signals (with copper flashing caution), and the high-tech metals like lithium became red-hot with a boost from bold government activism. By Wednesday’s close, energy and materials stocks had helped buttress the market, showing that the year’s gains are broadening out beyond just Big Tech. The question ahead is whether these moves in oil and metals are the start of a longer cycle – or, in the case of lithium, perhaps a bit of bubble excitement that eventually cools. For now, though, sectors long left for dead (like mining and energy) are having their moment in the sun.

Industrials & Corporate Moves: Deals Drive Select Stocks

Outside of high tech and commodities, several old-economy industrial names and deal-driven stories made headlines. One notable gainer was Boeing, which provided a bright spot for the Dow Jones Industrial Average. Boeing’s stock rose about 2% on Tuesday after the aerospace giant announced a major commercial order and positive signals from abroad ^[92]. The company secured an $8+ billion order from Uzbekistan Airways for dozens of its fuel-efficient Boeing 787 Dreamliner jets ^[93]. This deal suggests that airline demand for new planes – which had been subdued in some regions – is picking back up. Moreover, Boeing hinted that China may be poised to resume purchasing its planes after a long freeze. Reports surfaced of a potential large Boeing jet sale to China as well ^[94]. Since China’s government had halted Boeing purchases during trade tensions, any thaw would be significant. Investors took these developments as a sign that Boeing’s fortunes could be turning around in international markets. The stock’s climb helped limit the Dow’s losses on Tuesday, demonstrating Boeing’s outsized influence on the blue-chip index ^[95]. It also bolstered the broader industrial sector, which has been trying to play catch-up to tech this year.

In the utility and infrastructure space, Sempra Energy delivered one of the week’s most significant corporate moves. Before markets opened Tuesday, Sempra announced a blockbuster $10 billion deal to sell a 45% stake in its Sempra Infrastructure Partners unit – which includes LNG (liquefied natural gas) terminals and pipelines – to a consortium led by private equity firm KKR ^[96]. The transaction will inject cash into Sempra as it pivots toward its core regulated utility business in California and Texas. Notably, Sempra also gave the green light to a $14 billion expansion of its Port Arthur LNG export project in Texas, reflecting confidence in growing global demand for U.S. natural gas ^[97].

Wall Street greeted the news enthusiastically: Sempra’s stock surged over 4%, hitting its highest level in nearly seven months ^[98]. Investors liked that the deal will allow Sempra to fund its $56 billion capital plan through 2029 without issuing new equity, thereby avoiding share dilution ^[99]. The influx of KKR and co-investor capital essentially “de-risks” Sempra’s balance sheet and underscores the strong appetite investors have for energy infrastructure assets. It’s also telling that big money is flowing into LNG – a reminder that even as the world transitions to renewables, natural gas remains a hot commodity (especially given rising energy needs from AI data centers, as Sempra noted ^[100]). By shedding a stake in its midstream assets, Sempra aims to sharpen its focus on being a leading pure-play utility growth company delivering electricity and gas to American customers. The stock market’s reaction indicates confidence that this strategic shift will pay off in steadier earnings.

Elsewhere, mergers and acquisitions (M&A) activity continued at a brisk pace. In the healthcare sector, Premier Inc. – a group purchasing and data analytics firm for hospitals – agreed to be taken private in a $2.6 billion buyout by private equity firm Patient Square Capital (announced late Monday). And in real estate, a headline-grabbing deal saw brokerage Compass Inc. snap up rival Anywhere Real Estate (the parent of Coldwell Banker and Century 21) for roughly $1.6 billion in stock. That merger, unveiled just before this period, sent Anywhere’s shares soaring nearly 50% last week ^[101] and was hailed as a “major power play” creating the world’s largest real estate brokerage ^[102]. While these specific deals didn’t move the overall market, they illustrate a trend: private capital is actively hunting bargains in beaten-down sectors (from healthcare to housing), and companies are seizing strategic combos to scale up.

Finally, it’s worth noting a leadership shake-up that had the business world talking: Linda Yaccarino, the CEO of Elon Musk’s X (formerly Twitter), announced she is stepping down after a rocky tenure trying to win back advertisers. The move, though at a private company, underscores turbulence in the social media space – and by extension, could impact public peers like Meta (Facebook) or Snap if advertising dollars shift. While X’s saga is largely separate from the NYSE, it’s part of the broader corporate news landscape that investors monitor.

In summary, the past two days brought a whirlwind of developments across the NYSE: a cooling but still resilient stock market, high-stakes moves by the Fed and White House, blockbuster corporate deals, and plenty of sector rotation as traders parsed who the winners and losers of the moment are. The NYSE saw record highs one day, a mild sell-off the next, and pockets of extreme exuberance (AI and lithium) alongside notes of caution (Fed warnings and earnings letdowns). As one famous hedge fund foresees a euphoric melt-up and crash, many investors are simply riding the waves of news – buying the dips, rotating into energy and value stocks, and betting that the economic “soft landing” story can hold. The top developments from Sept. 23–24 show a market at a crossroads: optimistic but on guard, balancing the promise of innovation and growth against the perils of inflation and policy pivots. In the coming days, economic data and Washington’s funding fight could tip the scales further. For now, Wall Street remains on its toes, digesting every AI announcement, Fed utterance, and deal headline in this dynamic, late-2025 bull run.

Sources: Bloomberg; Reuters; Wall Street Journal; CNBC; Company press releases.

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