What began as banner day for stocks turned into a major rout as investors signaled ongoing skepticism about the longevity of the artificial intelligence boom and trimmed hopes of support from the Federal Reserve.
The tech-heavy Nasdaq fell 2%, and the broad S&P 500 index dropped by more than 1.5%. The Dow Jones Industrial Average, which tracks 30 top-tier stocks, declined by nearly 390 points. It had been up 700 points earlier in the day. Cryptocurrencies also shed billions in value: Bitcoin had fallen below $87,000 as of late Thursday afternoon, weeks after setting highs above $120,000.
The stunning turnaround added further unease to an already shaky economy that’s forced households to trim budgets amid still-stubborn inflation and signs of a wavering job market. With an ever-increasing portion of the economy’s principal driver — consumer spending — now reliant on affluent households, an extended market pull-back could inflict wider damage.
“You don’t have to have the biggest bubble in history for an expensive stock market and ends up seeing declines,” said Matt Maley, chief market strategist at Miller Tabak asset management group.
Traders’ hopes were boosted early Thursday by a better-than-expected jobs report that appeared to show the economy remained resilient. Even before the day began, stocks looked poised to rise after Nvidia, the chip maker at the heart of the AI boom, reported strong quarterly earnings and revenue.
Yet by midday, markets had turned red. The solid September jobs report diminished the odds that the Federal Reserve will cut interest rates next month to lower the cost of borrowing money to spur economic activity. When investors don’t have to pay as much in interest, they often put those savings into stocks.
“The broad rebound in payrolls suggests diminished risks of a higher unemployment rate,” analysts with Morgan Stanley said in a note published shortly before noon. “We no longer expect a Fed cut in December.”
Losses were further compounded by ongoing concerns about AI — namely, how much more profitable the companies buying chips like Nvidia’s will be. The fears were articulated in a Wednesday evening post on X by Michael Burry, made famous by the movie “The Big Short.”
“Just because something is used does not mean it is profitable,” he wrote.
Finally, the ongoing sell-off of bitcoin indicated to some traders that a key source of support for stocks — retail or day traders — were beginning to waver on their trademark “buy the dip” mentality.
“I wouldn’t say we’ve flipped from bull to bear,” said Steve Sosnick, chief strategist at Interactive Brokers financial group. “I would say we’ve flipped from bull to balanced market in the short term. A lot depends on whether sentiment continues to weaken.”
Stocks had already been showing signs of flagging in recent weeks. With today’s losses, the S&P 500 fell to its lowest point since September.
The long-delayed September jobs report, which showed that the U.S. had added a sturdy 119,000 jobs in September, appeared to show some glimmers of hope for the economy.
Although the unemployment rate ticked up from 4.3% in August to 4.4%, approximately 450,000 workers entered the labor force. Economists view this as evidence that job opportunities are still plentiful, despite a wave of corporate layoffs.
Just prior to the release of Thursday’s jobs report by the Bureau of Labor Statistics, Verizon told employees it planned to lay off 13,000 employees, or approximately 13% of its entire workforce.
The company joined a suite of other blue-chip employers that say they plan to eliminate tens of thousands of jobs, including Amazon, General Motors, IBM, Microsoft, Paramount, Target and UPS.
The details of the jobs report, which captured conditions before the government shutdown as well more recent jobs data, suggested a more mixed picture for the U.S. economy.
Manufacturing shed 6,000 jobs, continuing a trend in a sector the Trump administration has touted as a key target of its economic policies. Transportation and warehousing also saw job losses totaling 25,300. Wage growth slowed, and job totals for July and August were revised downward.
The employment gains in September were concentrated in the health care, hospitality and social assistance sectors.
