Stocks showed some stress yesterday.
After last week's sell off, Thursday delivered the worst day for all major US indices since early October.
Here’s what’s driving it.
What Moved the Markets?
Tech took a big hit.
The Nasdaq fell 2.29%, closing below its 50-day moving average for the first time since April.
Heavyweight stocks like Nvidia, Broadcom, Alphabet, and Disney dragged the index lower as investors started questioning whether AI valuations have run too far, too fast.
Rate-Cut Expectations Just Shifted
This was the biggest catalyst.
At the start of the week, markets were pricing a 63% chance of a December Fed rate cut.
Now? Around 51% basically a coin toss.
Why the sudden doubt?
Powell’s recent comments hinted December isn’t guaranteed
Fed members are cautious about easing too quickly
The government shutdown left the Fed without jobs and inflation data
A more cautious Fed is usually:
USD supportive
Equity-negative
Volatility-positive
This is exactly what we saw.
Shutdown Ends But Data Chaos Begins
Although the record-long shutdown ended Wednesday night, the damage is done:
Some reports may never be released
New data may be distorted or delayed
Q4 GDP could see a temporary hit
Markets don’t know what the “true” state of the economy is
This uncertainty is already feeding into price action, and we should expect more erratic swings as data comes back online.
Crypto Joins the Selloff
Bitcoin dropped to $98,072, the lowest level since May.
Even with positive regulatory news, crypto remains highly correlated when tech sells off, Bitcoin sells off harder.
Is this a sign that risk appetite is weakening across the board?
This wasn’t a normal red day, it was a change in tone.
The relationship between interest rates, tech stocks, crypto, and risk sentiment is tightening again.
That means the next few weeks could bring opportunity for those watching the key markets.