The market’s surprising reversal, Gap’s viral ad, AI regulation and more in Morning Squawk

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Here are five key things investors need to know to start the trading day:

Stock investors didn’t end up getting the post-Nvidia earnings market bounce they hoped for. After opening yesterday’s trading session higher, stocks took a dramatic midday tumble, once again casting doubt on the artificial intelligence trade.

Here’s what to know:

• Nvidia shares gave up their 5% post-earnings gain, ending the session down more than 3% despite the chipmaker’s blockbuster quarterly results and guidance. The AI darling’s stock is on track to finish the week down 5%.
• The Dow Jones Industrial Average swung more than 1,100 between its session highs and lows. All three major averages closed solidly in the red, with the tech-heavy Nasdaq Composite ending the day down 2.15%.
• Meanwhile, the CBOE Volatility Index — better known as Wall Street’s fear gauge — ended the session at a level not seen since April.
• Bitcoin fell to lows going back to April, further illustrating the shift away from risk assets.
• Before stocks’ midday reversal, Bridgewater founder Ray Dalio told CNBC that “we are in that territory of a bubble,” but that you don’t need to sell stocks because of it.
• The three major indexes are all on track to end the week in the red.
• Follow live markets updates here.

The belated September jobs report was finally released yesterday, and the headline number was much hotter than economists expected with an increase of 119,000 jobs. On the other hand, the unemployment rate ticked up to 4.4%, its highest level since 2021.

The chance of a rate cut at the Federal Reserve’s next meeting remained low after the report, according to the CME FedWatch Tool. But the odds flipped this morning after New York Fed President John Williams said he sees “room for a further adjustment” in interest rates, reviving hopes of a December cut.

Gap‘s “Milkshake” ad brought all the shoppers to the store. The retailer’s viral “Better in Denim” campaign with girl group Katseye helped drive comparable sales up 5% in its third quarter, beating analyst expectations.

The Old Navy and Banana Republic parent also surpassed Wall Street’s estimates on both the top and bottom lines, sending shares rising 4.5% in overnight trading. Athleta was the notable outlier, with the athleisure brand’s sales falling 11%.

Gap’s report comes at the end of a busy week for retail earnings. As CNBC’s Melissa Repko reports, one key theme of this quarter’s results has been that value-oriented retailers are winning favor with shoppers across income brackets.

The White House is putting together an executive order that would thwart states’ individual AI laws. A draft obtained by CNBC shows the order would focus on staging legal challenges and blocking federal funding for states to ensure their compliance.

The draft would work to the advantage of many AI industry leaders who have pushed back on a state-by-state approach to the technology’s regulation. A White House official told CNBC that any discussion around the draft is speculation until an official announcement.

Click here to read the full draft.

Joby Aviation is taking air taxi competitor Archer Aviation to court. In a lawsuit filed Wednesday, Joby accused Archer of using information stolen by a former employee to “one-up” a deal with a real estate developer.

Joby alleges that George Kivork, its former U.S. state and local policy lead, took files and information before jumping to the competitor in an act of “corporate espionage.” Archer called the case “baseless litigation” and said it’s “entirely without merit.”

Here are our recommendations for stories to circle back to this weekend:

— CNBC’s Liz Napolitano, Tasmin Lockwood, Melissa Repko, Jeff Cox, Sarah Min, Emily Wilkins, Mary Catherine Wellons and Samantha Subin contributed to this report. Josephine Rozzelle edited this edition.