The Dow Jones Industrial Average plunged nearly 800 points Thursday as investors continued to panic over AI spending in the tech sector and hopes for an interest-rate cut next month diminished.
The Dow fell 798 points, or 1.7% — its worst day in more than a month after notching a new record high just the day before. The S&P 500 slipped 1.9%, led downward by Disney, which fell 8% after it reported disappointing revenue.
The tech-heavy Nasdaq slipped 2.3% as investors continued to panic over whether AI stocks have been massively overvalued, worsening a sell-off that started last week.
Although the Nasdaq opened strong Thursday, investors quickly pulled back on companies that have been shelling out massive amounts of capital on pricey, power-hungry data centers.
The “Magnificent Seven” tech firms – which have pledged billions of dollars to AI efforts – were battered as shares in Nvidia, Broadcom and Tesla fell 3.6%, 4.3% and 6.6%, respectively.
Alphabet and Amazon each fell about 3%. Shares in Microsoft dipped 1.6% while Meta traded roughly flat.
Meanwhile, the US government reopened on Thursday after its longest-ever shutdown.
“While that is a relief for markets and the economy, there is still plenty of uncertainty, particularly around the missed inflation and jobs data and how these fronts have been faring,” Carol Schleif, chief market strategist at BMO Private Wealth, said in a note Thursday.
She noted that monthly jobs and inflation data – which was almost entirely put on pause during the 43-day shutdown – is “so vital for interest rate expectations.”
National Economic Council Director Kevin Hassett said Thursday that the October jobs report will be released after a delay, though it will not include the unemployment rate.
Investors worried that the lack of data could prevent the Fed from slashing interest rates during its Dec. 10 meeting, since officials have been flying blind on guidance without government data.
The odds of a quarter-point cut plunged to 51.9% on Thursday – a more than 10% drop from the previous day, according to CME FedWatch.
White House press secretary Karoline Leavitt said Wednesday that October inflation and jobs reports may never be released, adding that the government shutdown could hit fourth-quarter GDP by as much as 2 percentage points.
“While we have always expected that many of the data points missed during the shutdown will remain dark, there are questions about what the inflation and jobs data will look like once these reports come back online,” Schleif said.
“We would not be surprised to see some market chop over the coming weeks as the government gears and economic data presses get turning again.”
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