U.S. markets executed a sharp U-turn on Thursday, ending the session deep in the red. A morning rally, initially sparked by blockbuster earnings from Nvidia, collapsed as investors digested a confusing employment report. Consequently, the stock market selloff erased early optimism, driven by renewed fears that the Federal Reserve may pause its interest rate easing campaign.
Volatility gripped the trading floor as all three major indexes finished lower. The technology sector, which had led the morning charge, ultimately weighed heavily on the market. The Nasdaq Composite suffered the steepest losses, while cryptocurrency markets tumbled, signaling a rapid retreat from riskier assets.
Nvidia Delivers, But Macro Fears Win Out
The day began with high enthusiasm following Nvidia’s post-market report on Wednesday. The AI chipmaker smashed expectations, delivering consensus-beating revenue and robust forward guidance. Initially, this performance alleviated concerns that tech valuations had detached from economic reality.
However, the “buy the rumor, buy the news” sentiment quickly evaporated. Traders shifted their gaze from corporate success to gathering macroeconomic storm clouds including inflation, potential tariffs, and monetary policy.
Market analysts observed that while Nvidia’s fundamentals remain strong, they were insufficient to support the broader market against macro headwinds. The subsequent stock market selloff indicates a painful recalibration of asset prices in the face of policy uncertainty.
Labor Market Data Sparks Confusion
The primary catalyst for the midday reversal was a muddled jobs report, which suffered from data gaps due to the recent 43-day federal government shutdown.
While the headline number exceeded expectations, the underlying details were troubling. A surprise increase in the unemployment rate to 4.4% pointed to a softening labor market. Furthermore, a separate metric revealed that continuing jobless claims have reached their highest level in nearly four years.
This mixed data complicates the Federal Reserve’s path forward. With many government statistics either stale or incomplete due to the shutdown, central bankers lack a clear picture of the economy heading into next month’s policy meeting.
Fed Rate Cut Hopes Diminish
As a result of the data, financial markets are swiftly adjusting their forecasts. The probability of a third interest rate cut this year has plummeted to approximately 43.8%, a stark drop from the near-certainty seen just weeks ago.
While some economists argue for a 25-basis-point cut, the prevailing sentiment is that the Fed may choose to “play it safe” amid the ambiguity. This uncertainty drove the CBOE Volatility Index (VIX)—Wall Street’s “fear gauge”—to its highest point since mid-October.
Closing Numbers and Global Markets
The selloff was broad-based by the closing bell:
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Dow Jones: Fell 192.15 points (0.42%) to 45,946.62.
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S&P 500: Dropped 62.94 points (0.95%) to 6,579.22.
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Nasdaq: Slid 320.59 points (1.43%) to 22,242.50.
Internationally, markets were more resilient. Asian stocks posted strong gains, with Japan’s Nikkei surging over 2.6%. Meanwhile, commodities and crypto saw divergent paths:
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Crypto: Bitcoin tumbled over 4%, falling below $87,000, while Ethereum shed more than 5%.
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Oil & Gold: U.S. crude oil settled at $59.14 per barrel, while gold ticked higher to $4,085.48, acting as a hedge against the day’s volatility.
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