A trader in options works on Thursday on the floor of the New York Stock Exchange. Richard Drew / AP What started as a great day for stocks turned into a significant sell-off as investors showed continued skepticism about the durability of the artificial intelligence boom and lowered hopes for support from the Federal Reserve. The technology-focused Nasdaq index fell 2%, and the broad S&P 500 index dropped more than 1.5%. The Dow Jones Industrial Average, which tracks 30 leading companies, lost nearly 390 points. Earlier in the day, it had been up 700 points. Cryptocurrencies also lost billions in value: as of late Thursday evening, Bitcoin had dropped below the $87,000 mark, having traded at highs above $120,000 a few weeks ago. This startling reversal added further anxiety to an already shaky economy that has forced households to cut budgets amid persistent inflation and signs of a cooling labor market. As an ever-larger share of the economy’s main engine—consumer spending—now depends on wealthy households, a prolonged market pullback could inflict broader damage. “You don’t need the biggest bubble in history for an expensive stock market” to see a decline, noted Matt Maley, chief market strategist for asset management group Miller Tabak. Traders’ hopes were bolstered on Thursday by a better-than-expected employment report that seemed to signal economic resilience. Even before the day began, stocks looked set for gains after Nvidia, the chipmaker at the center of the AI boom, reported strong quarterly earnings and revenue. However, by midday, markets had turned red. The strong September employment report reduced the likelihood that the Federal Reserve would cut interest rates next month to make borrowing cheaper to stimulate economic activity. When investors don’t have to pay as much in interest, they often put those savings into stocks. “The broad job recovery suggests reduced downside risks to unemployment,” Morgan Stanley analysts said in a note published shortly before noon. “We no longer anticipate a Fed rate cut in December.” The losses were exacerbated by ongoing concerns about AI—specifically, how much more profitable the companies buying chips like those made by Nvidia will become. These concerns were voiced Wednesday evening on X by Michael Burry, famous from the movie “The Big Short.” “Just because something is being used doesn’t mean it’s profitable,” he wrote. Finally, the ongoing sell-off in Bitcoin signaled to some traders that a key source of support for stocks—retail or day traders—began to waver in their signature “buy the dip” mentality. “I wouldn’t say we’ve gone from a bull market to a bear market,” said Steve Sosnick, chief strategist for the financial group Interactive Brokers. “I would say we’ve gone from bullish to balanced in the short term. A lot depends on whether sentiment continues to weaken.” Recommended Business News US created 119,000 jobs in September, but there are signs of a cooling labor market Business News Bargain hunters drive Walmart sales and outlook Stocks had already shown signs of weakening in recent weeks. With Thursday’s losses, the S&P 500 fell to its lowest point since September. The lagging September employment report, which showed the U.S. created a solid 119,000 jobs, offered some glimmers of hope for the economy. September Job Report Shows Economy Added 119,000 Jobs, Unemployment Rate at 4.4% Although the unemployment rate rose from 4.3% in August to 4.4%, about 450,000 people entered the labor force. Economists see this as evidence that job opportunities remain abundant despite a wave of corporate layoffs. Shortly before the Bureau of Labor Statistics released the employment report, Verizon informed employees of plans to lay off 13,000 people, or about 13% of its workforce. The company joined a number of other “blue chips” announcing plans to cut tens of thousands of jobs, including Amazon, General Motors, IBM, Microsoft, Paramount, Target, and UPS. Details of the employment report, which reflected conditions before the government shutdown, along with more recent employment data, painted a more mixed picture for the U.S. economy. The manufacturing sector shed 6,000 jobs, continuing a trend in an industry the Trump administration has touted as a key target of its economic measures. The transportation and warehousing sector also lost 25,300 jobs. Wage growth slowed, and overall employment figures for July and August were revised downward. September job growth was concentrated in the healthcare, hospitality, and social assistance sectors. Another slice of the economy came from Walmart, which reported strong sales on Thursday and raised its forecast for the year. However, this strength points to cracks in the economy. Executives said the chain is attracting more higher-income shoppers looking for bargains and noted that lower-income families are feeling more pressure. “As wallets get tighter, you see more consumer money going toward necessities rather than discretionary goods,” Chief Financial Officer John David Rainey said during an earnings conference call Thursday morning.
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