Stocks Sink as Fed Clouds Gather Before Data Wave: Markets Wrap

(Bloomberg) — Wall Street traders bracing for an economic data deluge as the US shutdown ended drove stocks and bonds lower on concern over whether the data will be able to clear the path for a Federal Reserve rate cut.

With much of the optimism about the government reopening already priced in, the S&P 500 dropped over 1%. A selloff in big tech weighed heavily on trading. Treasury yields climbed across the curve as money markets projected about even odds of a central bank reduction in December.

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President Donald Trump signed legislation to end the longest government shutdown in US history. However it could still take days, or even weeks, for the federal bureaucracy to fully restart and dig out of the backlog after being closed since Oct. 1.

The Bureau of Labor Statistics is expected to publish a calendar in the coming days with updated release dates for delayed data. The October jobs report will be released without a reading of the unemployment rate, Trump’s top economic adviser Kevin Hassett told Fox News’ America’s Newsroom.

“The gears of the government should be working again soon, and 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,” said Carol Schleif at BMO Private Wealth.

Schleif says she would not be surprised to see some market chop over the coming weeks as the government gears and economic data presses get turning again. While she still expects a rate cut in December, she notes the data blackout has made the Fed’s job difficult.

The S&P 500 wiped out its November advance. A gauge of megacaps sank 2.4%. Cisco Systems Inc. soared on an upbeat forecast.

The yield on 10-year Treasuries climbed three basis points to 4.10%. That’s ahead of a $25 billion sale of 30-year bonds. The dollar edged lower. Oil recovered from a sharp slump as traders weighed the outlook for a record surplus against supply risks.

Market odds of another Fed rate cut in December have dropped from a near-certainty before the last Fed meeting.

To Don Rissmiller at Strategas, this matters because there has been a worrying package of US data recently, but there’s been lack of official government reports to validate the extent of this weakness.

“The US shutdown has ended, but there will be lingering disruptions for several months,” he said. “It’s understandable that monetary policymakers want to move prudently – but this leaves open the possibility that US labor market conditions weaken further in the fourth quarter.”

Stubbornly high inflation and continued weakness in the labor market are driving a growing divide among Fed officials on the best path ahead for interest rates. After policymakers lowered their benchmark rate for the second straight time last month, Chair Jerome Powell warned that a December cut is far from a “foregone conclusion.”

Fed Bank of Cleveland President Beth Hammack told MarketWatch she remains focused on price stability as the labor market softens, adding it is critical for the US central bank to reach its 2% inflation target. Separately, her San Francisco counterpart Mary Daly said it’s too soon to decide whether policymakers should lower rates in December.

Their remarks came a day after Fed Bank of Boston President Susan Collins said she favored holding interest rates steady amid still-strong growth that could slow or stall progress on cooling inflation.

At Evercore, Krishna Guha says her decision this week to speak out clearly against a December cut raises his level of concern about Powell’s struggle to manage deep divisions within the Fed and creates additional uncertainty over the path of rates.

“We would shift to a December skip/January cut if we thought a one meeting delay for more data offers a plausible way to resolve these stark differences but we do not think it does,” Guha said. “We think a skip creates more problems for Powell than it solves, which is why we still end up favoring a ‘hawkish cut’.”

Of course, greater clarity on the performance of the underlying real economy could also bolster the case for a quarter-point move if the new information reveals further softening in the labor market and relatively benign inflation – both of which are active debates, to be sure, according to Ian Lyngen, Vail Hartman and Delaney Choi at BMO Capital Markets.

“Despite the fact that investors have long awaited the resumption of dataflow from the BLS, the upcoming reports will still likely be met with some skepticism given the data-collection delays and timetable shifts,” they said.

In addition, the reopening of the US government doesn’t mean the flow of economic data will be restored straight away, according to Thomas Ryan at Capital Economics.

“Survey-based data not collected in October during the funding lapse will take weeks to gather, process and quality check. Publishing missing field-collected data, like consumer prices, is probably an impossible task,” he said.

For investors, the message is clear — stay nimble, said Seema Shah at Principal Asset Management.

“In an environment where information is scarce and cross-currents risk evolving into rip tides, reactions can be magnified, and portfolio flexibility matters more than bold conviction,” she noted.

With the flow of releases resuming only gradually, traders are left with continued US data void for a while, which means price action could be driven more by sentiment and positioning than by hard data, according to Fawad Razaqzada at Forex.com.

“The question now is whether the market’s recent exuberance has run its course,” he said. “After a stellar rally since April, technology shares look increasingly overvalued and overstretched, with sentiment tempered by a lack of fresh catalysts and a lull in economic data.”

Over the past few sessions, a noticeable rotation has occurred, with traders moving out of high-growth names and back into defensive and value-oriented sectors, he noted.

“Is this a sign that risk appetite is fading, or merely the sort of rotation one expects in a healthy bull market? Time will tell,” he said. “But it’s worth noting that insider selling within the tech space has picked up lately, which rarely bodes well. Traders would do well to stay alert.”

The S&P 500 tech’s rally off 2025 lows has pushed the group to relative valuation extremes, with the sector reaching more than one standard deviation above recent norms, according to Michael Casper and Nathaniel Welnhofer at Bloomberg Intelligence.

“A blistering revenue surge, not speculation, has fueled the run, but with premiums this stretched, fundamentals will need to keep sprinting just to stay in place, they concluded.

Corporate Highlights:

Cisco Systems Inc., the network-equipment giant, boosted its 2026 forecast, showing progress in its effort to capture more artificial intelligence spending. Google is under investigation by European Union antitrust watchdogs over concerns it unfairly demotes some news results in a probe that risks adding to its €9.5 billion ($11 billion) EU fines tally and worsening fraught relations with the Trump administration. Tencent Holdings Ltd. has struck a deal with Apple Inc. that will see the iPhone maker handle payments and take a 15% cut of purchases in WeChat mini games and apps, resolving a high-profile dispute that’s dogged the world’s largest smartphone arena. Tencent posted a faster-than-anticipated 15% rise in revenue, sustaining the steady growth that’s helped the social media leader attract investors despite eschewing splashy investments in AI infrastructure. Alibaba Group Holding Ltd. is preparing an overhaul of its main mobile AI app in coming months to help it more closely resemble OpenAI’s ChatGPT, a key step in a broader effort to catch rivals and eventually earn money off individual users. Baidu Inc. released the latest iteration of its flagship AI models, trying to keep up in the highly competitive Chinese artificial intelligence arena. Verizon Communications Inc. is discussing plans to announce job cuts across the company next week, according to people familiar with the wireless carrier’s plans, a major step in a transformation led by new Chief Executive Officer Dan Schulman. Walt Disney Co. reported sales that fell short of Wall Street estimates and said a slate of big-budget films, including a new Avatar picture, will weigh on results for the first quarter of its new fiscal year. Pfizer Inc. is looking to sell its remaining stake in Covid-19 vaccine partner BioNTech SE, a remnant from one of the pandemic’s most lucrative collaborations. Uber Technologies Inc. is expanding the availability of its reserved rides option to include popular ski destinations, part of a larger effort to lure wealthy consumers toward more premium services. Unionized Starbucks Corp. baristas are launching a wave of walkouts Thursday, a work stoppage they say could grow to become their biggest strike to date. Brookfield Corp.’s earnings rose in the third quarter as the Canadian money manager forges ahead with plans to evolve into an investment-led insurer. Burberry Group Plc’s sales rose as the UK fashion brand saw demand improve in the region that includes China, an indication its turnaround bid under Chief Executive Officer Joshua Schulman is starting to work. Rolls-Royce Holdings Plc reiterated its full-year profit guidance as strong demand for jet engines bolsters the British manufacturer’s order book. Deutsche Telekom AG said it would raise dividends for 2025 after third-quarter profit rose from a year earlier, bolstered by a record number of new users of home fiber lines in Germany. Siemens AG expects adverse currency movements to weigh on its results as the engineering company cuts its stake in MRI maker Siemens Healthineers AG to focus on growth in software. Red Bull GmbH risks hefty European Union antitrust fines after regulators hit the energy drinks giant with a full-scale probe into allegations it flouted the bloc’s competition rules. Glencore Plc and Hillhouse Investment Management plan to invest in Chuangxin Industries Holdings Ltd.’s upcoming initial public offering in Hong Kong, people familiar with the matter said, signaling confidence in the Chinese aluminum smelter’s prospects as the metal’s price surges. Some of the main moves in markets:

Stocks

The S&P 500 fell 1.3% as of 11:42 a.m. New York time The Nasdaq 100 fell 1.7% The Dow Jones Industrial Average fell 1% The Stoxx Europe 600 fell 0.6% The MSCI World Index fell 1% Bloomberg Magnificent 7 Total Return Index fell 2.4% The Russell 2000 Index fell 1.8% Currencies

The Bloomberg Dollar Spot Index fell 0.3% The euro rose 0.4% to $1.1645 The British pound rose 0.5% to $1.3203 The Japanese yen rose 0.3% to 154.29 per dollar Cryptocurrencies

Bitcoin fell 1% to $100,920.76 Ether fell 2.3% to $3,343.51 Bonds

The yield on 10-year Treasuries advanced three basis points to 4.10% Germany’s 10-year yield advanced five basis points to 2.69% Britain’s 10-year yield advanced four basis points to 4.44% The yield on 2-year Treasuries advanced two basis points to 3.59% The yield on 30-year Treasuries advanced two basis points to 4.69% Commodities

West Texas Intermediate crude rose 0.8% to $58.98 a barrel Spot gold was little changed ©2025 Bloomberg L.P.