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Wall Street Rate Cut: Wall Street slid on Thursday as Nvidia and other major AI stocks suffered sharp losses. Investors grew cautious, lowering their expectations for near-term interest rate cuts amid persistent inflation worries.
Uncertainty deepened as central bankers appeared divided over the strength of the U.S. economy.
Adding to the tension, the U.S. government reopened after a record 43-day shutdown that had shaken investor confidence and stalled vital economic reports.
In the past few days, several Federal Reserve officials have shown growing hesitation toward cutting interest rates further.
Their remarks have left markets divided, with the odds of a December rate cut now almost even.
Many policymakers pointed to persistent inflation pressures and a surprisingly stable job market as reasons to pause after two rate cuts earlier this year.
“The key question is whether the inflation caused by tariffs is short-lived or here to stay,” said Jake Dollarhide, CEO of Longbow Asset Management in Tulsa, Oklahoma.
“That uncertainty is making some Fed officials hesitant to lower rates. Either decision — cutting or holding steady — carries its own risks.”
At the same time, stocks of several top-performing U.S. companies fell, as investors worried that high valuations driven by AI enthusiasm may have gone too far.
Nvidia, the world’s most valuable company, tumbled 4.7%. Tesla sank 7.6%, and Broadcom slipped 5.4%.
“There’s still plenty of uncertainty about where the economy is headed,” said Peter Cardillo, chief market economist at Spartan Capital Securities in New York.
“The market is going through a short-term correction in the AI sector, along with some rotation as investors adjust their positions.”
The S&P 500 fell 1.62%, closing at 6,739.60. The Nasdaq lost 2.48% to finish at 22,825.50, while the Dow Jones Industrial Average slipped 1.38% to 47,590.87.
Out of the 11 major S&P 500 sectors, eight ended in the red. Technology stocks led the slide with a 2.74% drop, followed by a 2.58% decline in consumer discretionary shares.
Cisco Systems surged almost 5% after it raised its full-year profit and revenue guidance, reflecting confidence in steady demand for its networking gear.
Earlier this week, the Dow reached record highs on both Tuesday and Wednesday, as investors trimmed their exposure to tech stocks and redirected funds toward the health care sector.
Wall Street’s move away from tech stocks was clear this week. The S&P 500 value index climbed about 1.4%, while the growth index edged down 0.7%.
Walt Disney dropped 7.7% after the company hinted it could face a long standoff with YouTube TV over the distribution of its cable channels.
Recent figures from payroll processor ADP revealed that private employers were cutting more than 11,000 jobs per week through late October.
Data from Indeed Hiring Lab also showed retail job postings fell 16% in October compared with last year, underscoring continued softness in the labor market.
Traders have grown more cautious, now pricing in roughly a 47% chance of a 25-basis-point rate cut in December — down sharply from about 70% the week before, according to CME Group’s FedWatch tool.
APA Corp climbed 3.2% after reports suggested that Spain’s Repsol is exploring a reverse merger of its upstream business with potential partners, including the U.S. energy company.
On the other hand, memory chipmakers Western Digital and SanDisk fell 3.1% and 10.7%, respectively, after Japan’s Kioxia Holdings reported a drop in both sales and profits.
In the S&P 500, losing stocks outnumbered gainers by almost two to one. The index saw 15 new highs and six new lows.
The Nasdaq showed a similar trend, with 51 stocks hitting new highs and 178 falling to new lows, highlighting the market’s uneven performance.
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