Tech Stocks Collapse Dragging Major Indices Into Sharp Selloff Territory

US stock markets reversed sharply lower on Thursday as technology and semiconductor stocks surrendered early gains, with the S&P 500 finishing down 1.56% to post its lowest level in 2.25 months. The Dow Jones Industrial Average declined 0.84% to a fresh 5-week low, while the Nasdaq 100 posted steeper losses at 2.38% lower, marking its weakest showing in two months. December E-mini S&P futures fell 1.56% with December E-mini Nasdaq futures sinking 2.46%, signaling continued pressure.

Fed’s Hawkish Pivot Reverses Market Momentum

The abrupt turnaround came after Federal Reserve officials dampened rate-cut expectations with increasingly cautious messaging. Cleveland Fed President Beth Hammack stated that cutting rates to support the labor market risks extending elevated inflation and could fuel excessive risk-taking in financial markets. Chicago Fed President Austan Goolsbee echoed concerns that inflation appears stalled or rising, making him uncomfortable with front-loading multiple rate cuts. Fed Governor Michael Barr reinforced the message by expressing worry about inflation remaining near 3%, arguing the central bank must proceed carefully given inflation persists above its 2% target.

Market pricing reflected this shift, with traders reducing the probability of a December 9-10 rate cut to just 35% from 25% the prior day.

Mixed Signals From Economic Data Fail to Support Equities

Early Thursday support materialized after September nonfarm payrolls beat forecasts at 119,000 versus expectations of 51,000, initially suggesting underlying labor market strength. However, this positive was offset by an unexpected 0.1 percentage point rise in the unemployment rate to 4.4%, reaching its highest level in nearly four years. The conflicting signals—robust hiring paired with rising unemployment—left investors uncertain about the Fed’s likely path forward.

Separately, weekly initial jobless claims fell 8,000 to 220,000, better than the anticipated 227,000. Yet continuing claims surged to 1.974 million, the highest since 2020, indicating those already jobless face mounting difficulty finding new positions. Average hourly earnings growth held steady at 3.8% year-over-year, slightly outpacing the 3.7% consensus, suggesting wage pressures remain resilient.

Housing data delivered a modest bright spot, with October existing home sales rising 1.2% month-over-month to an 8-month high of 4.10 million units, marginally exceeding the 4.08 million forecast. The Philadelphia Fed’s November business outlook survey however disappointed, improving only 11.1 points to -1.7 versus expectations of +1.0.

Tech Giants Stumble Despite Nvidia’s Upside Surprise

Nvidia’s strong third-quarter revenue of $57.01 billion, beating the $55.19 billion consensus, along with its robust Q4 guidance of $65 billion ±2% against the $62 billion expectation, initially propelled technology stocks higher. Yet the rally proved short-lived as Nvidia shares themselves retreated more than 3%.

The Magnificent Seven technology cohort joined the decline, with Tesla and Amazon falling over 2%, Alphabet and Microsoft dropping more than 1%, Apple sliding 0.86%, and Meta declining 0.19%. The semiconductor sector bore the brunt of selling, with Micron Technology leading losers in the Nasdaq 100 by plunging over 10%. Advanced Micro Devices fell 7%, Applied Materials and Lam Research each dropped 6%, Marvell Technology, ASML Holding, and KLA Corporation slid more than 5%, while Microchip Technology, NXP Semiconductors, ARM Holdings, Intel, and Qualcomm all declined 3% or more.

Bright Spots: Retail and Pharma Provide Relief

Walmart emerged as the session’s bright spot, surging over 6% after announcing an upgraded 2026 net sales growth forecast of 4.8% to 5.1%, up from its prior 3.75% to 4.75% guidance. The upgrade underscored resilient consumer spending despite economic uncertainty. Regeneron Pharmaceuticals climbed over 4% following FDA approval of its EYLEA HD injection for treating macular edema from retinal vein occlusion.

Solventum advanced 2% after acquiring Acera Surgical for $725 million in cash and unveiling a $1 billion share buyback program. Banking and infrastructure plays also found support, with Nasdaq Inc. jumping over 1% on Morgan Stanley’s upgrade to overweight with a $110 price target, and Jack Henry & Associates rising over 1% after Raymond James double-upgraded the stock to strong buy with a $198 target.

Conversely, Bath & Body Works collapsed over 24% after Q3 net sales of $1.59 billion missed the $1.63 billion consensus and management slashed its full-year EPS guidance to $2.83 from $3.28-$3.53, well below the $3.44 consensus. Jacobs Solutions fell 10% as Q3 revenue of $3.15 billion came in just below the $3.16 billion forecast. Datadog dropped 9% on concerns that competitor Palo Alto Networks’ $3.35 billion acquisition of Chronosphere poses a competitive threat. Palo Alto itself declined 7% on the deal announcement, though PACS Group surged 55% after completing its restatement and audit committee investigation, with Q3 revenue jumping 31% year-over-year to $1.34 billion.

Bitcoin Extends Losses as Crypto Faces Headwinds

Bitcoin tumbled more than 3% to reach a 7-month low, continuing its sharp 6-week downtrend that has erased more than 31% from last month’s record high. The cryptocurrency’s weakness dragged down stocks with significant crypto exposure, as Galaxy Digital Holdings fell 9%, Mara Holdings dropped 8%, Coinbase Global declined 7%, MicroStrategy slid 5%, and Riot Platforms retreated 4%. Bitcoin’s current trading near the $89.61K level reflects broader risk-off sentiment across digital assets.

Treasuries Rally on Safe-Haven Demand and Inflation Relief

December 10-year Treasury notes closed up 6 ticks as yields fell 3.3 basis points to 4.104%, recovering from a 2-week low. The initial surge in job creation provided early support, but this was amplified as the higher unemployment rate bolstered speculation the Fed might still cut rates in December. Treasury demand also benefited from easing inflation expectations, with the 10-year breakeven inflation rate declining to a 6.5-month low of 2.250%. The sharp equity selloff itself boosted safe-haven demand for government bonds, though gains remained capped following the stronger-than-expected housing sales data and multiple Fed members’ cautious signals.

Global Markets Display Divergent Paths

Overseas equity markets showed mixed performance. Japan’s Nikkei Stock 225 rallied 2.65%, the Euro Stoxx 50 edged up 0.50%, while China’s Shanghai Composite declined 0.40%. European government bond yields traded mixed, with the 10-year German bund yield rising to a 6-week high of 2.742% before settling up 0.5 basis points at 2.716%, and the 10-year UK gilt yield slipping 1.6 basis points to 4.586% from a 5-week peak of 4.619%.

The ECB remained on the sidelines, with Governing Council member Makhlouf stating Eurozone rates are in good shape and he would require compelling evidence to shift policy. Swaps are pricing just a 2% probability of a 25 basis point rate cut at the December 18 ECB meeting.

Looking Ahead: Earnings Season Winds Down Amid Economic Data Deluge

With 460 of 500 S&P 500 companies having reported third-quarter results, 82% exceeded earnings forecasts, setting the stage for the best quarter since 2021. Third-quarter earnings expanded 14.6%, more than doubling the 7.2% year-over-year expectation. This week brings a cascade of delayed economic releases including real earnings, manufacturing and services PMI data, the University of Michigan consumer sentiment index, and the Kansas City Fed services activity report on Friday.

The coming days will test market resilience as investors navigate conflicting signals about Fed policy, economic momentum, and corporate profitability in an environment marked by persistent inflation concerns and shifting central bank messaging.