Wall Street Rattled by Job Woes as AI Winners Sink: Markets Wrap

(Bloomberg) — Volatility lashed Wall Street, with strong evidence of a cooling labor market pushing high-valuation tech stocks and crypto to big losses while bonds rallied on bets the Federal Reserve will cut rates.

Equities sold off for the second time in three days and 10-year yields tumbled the most in about a month following Challenger, Gray & Christmas Inc. data showing the largest October job cuts in more than 20 years. The Nasdaq 100 slumped 1.9%, and a closely watched volatility index briefly topped 20.

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While bets on Fed easing have powered the bull market alongside the artificial-intelligence boom, concerns over valuations have surfaced. Technical indicators are flagging reasons for caution while worries about a narrowing cohort of stocks driving gains have become louder.

If anything, the slide in equities appears to be taking some “froth” out of the market, according to Chris Murphy at Susquehanna International Group LLP.

“Risk off again,” said Fawad Razaqzada at Forex.com. “It goes to show it is not always about rate-cut bets, and reality is starting to bite. Frankly, the market needed this reality check. After months of AI-fueled exuberance, traders are rediscovering that fundamentals still matter.”

Investors also kept a close eye on policymakers speaking Thursday.

Fed Bank of Cleveland President Beth Hammack said inflation is a bigger risk than job weakness. Her Chicago counterpart Austan Goolsbee told CNBC that a lack of inflation data during the shutdown makes him uneasy about rate cuts. Governor Michael Barr said officials still have work to do on inflation and must ensure the labor market is solid.

The S&P 500 fell 1.1%. Nvidia Corp. and Tesla Inc. led losses in megacaps. The UBS US AI Winners Index tumbled nearly 3%.

The yield on 10-year Treasuries slid seven basis points to 4.09%. Money markets are now implying a better than 60% chance of a Fed cut next month. A dollar gauge dropped 0.3%. Bitcoin sank about 3%.

Read: Altman Says OpenAI Doesn’t Want a Government Bailout For AI

Read: US Shutdown Dealmaking Hits New Roadblocks as Tensions Flare

“We are sticking to our view that the Fed will deliver a follow-up 25 basis-point cut in December because restrictive Fed policy can worsen the already fragile employment backdrop,” said Elias Haddad at Brown Brothers Harriman & Co.

With the scarcity of data caused by the US government shutdown, investors have turned to private figures for the latest readings on the economy.

Companies announced 153,074 job cuts last month, almost triple the number during the same month last year and driven by the technology and warehousing sectors. It’s the most for any October since 2003, when the advent of cellphones was similarly disruptive, said Andy Challenger, the company’s chief revenue officer.

Against the backdrop of a low-hire labor market, this bout of corporate job-cutting does represent a bigger labor risk then the 2022 tech layoffs, when these workers were quicky scooped up by other industries, according to Adam Schickling, senior economist at Vanguard.

“However, we ultimately expect that persistent labor supply constraints over the next three years will help offset the unemployment impact of cyclical and technological pressures,” he said.

Read: Williams Says He’d Discount Bond Market’s Neutral-Rate Estimate

Meantime, Revelio Labs data showed the US lost 9,100 nonfarm jobs in October after gaining 33,000 the month prior.

“If anything, the data reinforces the difficulty in making a case that hiring is re-accelerating,” said Vail Hartman at BMO Capital Markets. “When combined with this morning’s Challenger data, we remain skeptical of the argument that the labor market is staging a re-acceleration into year-end.”

Don Rissmiller at Strategas says the US labor market is not collapsing, but it does not look robust to shocks either.

“While some FOMC members have been hesitant to commit to another fed funds rate cut at their December meeting, a wobbling labor market would likely force their hand,” he noted.

The US central bank lowered rates in October as a way to bolster the weakening labor market. But inflation, which at 3% in September remained well above the Fed’s 2% target, has also raised concerns among some officials that it will take longer to come down than they thought.

Read: US Companies to Boost Their Borrowing in 2026, Wells Fargo Says

Fed Chair Jerome Powell recently counseled against trying to predict whether another reduction was likely in 2025.

Despite his cautious rhetoric at the October policy meeting, Ulrike Hoffmann-Burchardi at UBS Global Wealth Management bets the US central bank will cut rates twice more by early 2026.

“Evidence of a cooling labor market will continue to mount, and recent inflation readings have not been sufficient to shift the Fed’s focus away from the weakening demand for workers,” she said. “Further rate cuts should lead to a decline in Treasury yields.”

Hoffmann-Burchardi says quality fixed-income offers an appealing combination of income and the potential to perform well in the event of slowing economic activity and further rate cuts. Income-based investors can also consider equity income or yield-generating structured strategies to improve cash returns, she noted.

“Today, we’re seeing a significant drop in interest rates,” said Louis Navellier at Navellier & Associates. “Still well above the yields before the October Fed cut, and may be more of a reaction to the volatility of the equity markets than a reassessment of the Fed’s posturing.”

Read: Buffett, Barclays Market Indicators Send Warning to Stock Bulls

Navellier said there’s still hope for a year-end rally in stocks once the government shutdown ends and the tariff situation is resolved.

“We are still two weeks from the very important Nvidia earnings, and strength there might be the catalyst to reaffirm the AI narrative,” he said. “If that is followed by a December Fed cut, we may still go out on a high at year’s end.”

The Wall Street veteran also noted that corrections with these levels of gains are normal and to be expected, not something to panic over.

Strong flows from retail investors are likely to support stocks into year-end, according to JPMorgan Chase & Co. strategists.

The forecast is based on seasonal patterns observed in a study of equity fund flows over the past decade, the team led by Nikolaos Panigirtzoglou said in a note. Outside of US election years, average flows tend to be higher in December and in the first quarter that follows, they found.

“Aside from the reality that pullbacks are inevitable even during the strongest trends, concerns of an ‘AI implosion’ remain overblown,” said Daniel Skelly, head of Morgan Stanley’s Wealth Management Market Research & Strategy Team. “That’s not to say a larger downturn can’t happen, or that certain stocks haven’t gotten overbid. But the longer-term AI story is intact.”

Skelly notes that such story revolves around a well-financed core of large AI spenders backed by strong earnings and 30 years of proven leadership over multiple tech cycles, including the Internet, the mobile phone era, e-commerce, cloud computing, and now AI.

Meantime, OpenAI Chief Executive Officer Sam Altman pushed back at the idea that the company would seek federal guarantees to reduce the risk of its AI infrastructure spending spree, one day after a top executive at the ChatGPT maker suggested there may be a role for the government to help finance the technology.

“We do not have or want government guarantees for OpenAI data centers,” Altman wrote in a lengthy social media post on Thursday. “Taxpayers should not bail out companies that make bad business decisions or otherwise lose in the market.”

Corporate Highlights:

Qualcomm Inc., the largest maker of smartphone processors, became the latest chipmaker to deliver an upbeat forecast and still leave investors underwhelmed. Chief Executive Officer Cristiano Amon said the world is actually understating how big AI will get. Gambling’s reach is extending deeper into the investment ecosystem as Google strikes a deal to pipe prediction market data from Kalshi Inc. and Polymarket into its finance platform. A federal judge said he is withholding approval of Google’s antitrust settlement with Epic Games Inc. until he is satisfied the pact over mobile app distribution benefits consumers and boosts competition. Microsoft Corp. is pursuing a more powerful form of AI called “superintelligence” it hopes will be capable of making advances in areas like medicine and materials science. Huawei Technologies Co. added a thin new handset to its lineup, offering Chinese consumers a direct competitor to Apple Inc.’s iPhone Air. Boeing Co. will avoid a criminal charge over two fatal 737 Max crashes after a federal judge paved the way for a $1.1 billion settlement agreement, handing the embattled manufacturer a victory in a long-running legal battle. Boeing signed agreements to sell 40 jets to three Central Asian nations on the sidelines of a summit with President Donald Trump on Thursday that’s part of a broader US push to pull the region out of China’s orbit. Peloton Interactive Inc. shared a stronger-than-anticipated holiday quarter forecast, as it aims to reposition itself as a holistic wellness brand and regain profitability after its first hardware revamp in years. Earlier Thursday, the firm issued a voluntary recall on about 877,800 units of its high-end Bike+ model in the US and Canada following reports that some seat posts broke, causing riders to fall off. Airbnb Inc. issued a better-than-expected outlook for the holiday quarter, citing strong demand as US travelers used its recently launched “reserve now, pay later” feature to book trips in advance. Expedia Group Inc. raised its full-year gross bookings and revenue outlook, signaling that strong travel trends are continuing into the holiday quarter. Take-Two Interactive Software Inc. delayed the release of Grand Theft Auto VI again, pushing back the much-anticipated video game by six months to November 2026. DoorDash Inc., the US food-delivery app leader, plunged after saying it will spend more on investments next year to build new products and bolster internal tools, weighing on its earnings forecast. Lyft Inc. jumped after projecting an acceleration in bookings this quarter, easing concerns about the ridehailing company’s efforts to expand globally and maintain customer loyalty. Uber Technologies Inc. is in talks on a potential deal with Getir that would help the US company further expand its delivery operations in Turkey, according to people with knowledge of the matter. Walt Disney Co. signed a new multiyear deal to make DraftKings Inc. the official betting site and odds provider for its ESPN sports networks, replacing a venture it had with casino operator Penn Entertainment Inc. Warner Bros. Discovery Inc., the parent of HBO and CNN, reported third-quarter revenue that missed analysts’ expectations, providing a glimpse into the company’s businesses as it puts itself up for sale. SoftBank Group Corp. explored a potential takeover of US chipmaker Marvell Technology Inc. earlier this year, people familiar with the matter said, in what would have been the semiconductor industry’s largest-ever deal. Texas officials have asked a state court judge to temporarily block Kenvue Inc. from marketing Tylenol as safe for pregnant women, and from issuing a dividend, escalating the company’s legal woes just days after announcing a major merger with Kimberly-Clark Corp. Eli Lilly & Co. and Novo Nordisk A/S secured deals with the Trump administration to slash prices for their blockbuster weight-loss drugs like Zepbound and Wegovy in exchange for tariff relief and wider Medicare access. Novo Nordisk has again increased its offer for Metsera Inc. as its takeover battle with Pfizer Inc. for the obesity startup escalates. Moderna Inc. posted a narrower third-quarter loss than Wall Street expected, a sign that its cost-cutting measures are helping offset the decline of its Covid business. Krispy Kreme Inc. reported positive cash from operations in the third quarter for the first time in three quarters — and its highest since late 2022 — as the doughnut maker progressed with its turnaround plan following the end of its US McDonald’s partnership in June. ConocoPhillips raised its total spending plans for the Willow oil and natural gas project in Alaska to as much as $9 billion, citing inflation and other rising costs. Under Armour Inc. said sales might fall as much as 5% this fiscal year, a bigger decline than Wall Street estimated and raising concern that the sportswear company’s turnaround effort isn’t making enough progress. EchoStar Corp. reported a $16.5 billion impairment charge and agreed to sell more spectrum licenses to Elon Musk’s SpaceX for $2.6 billion as it works to unwind parts of its 5G wireless network. Celsius Holdings Inc. sank on concern near-term sales might be disrupted by a distribution channel change involving its newly acquired Alani Nu brand. Aquarian Holdings agreed to buy insurer and annuity provider Brighthouse Financial Inc. for $4.1 billion in cash. Snap Inc. surged after the company announced a $400 million partnership with Perplexity AI Inc. to incorporate its AI-powered search engine into Snapchat. First Brands Group lawyers said the company needs access to its roughly $600 million of remaining bankruptcy financing to keep the auto-parts firm from shutting down immediately. Charles Schwab Corp. agreed to buy Forge Global Holdings Inc., a marketplace for buying and selling shares of private companies, for about $660 million. CarMax Inc. sank after terminating its chief executive over lagging sales and a nosedive of the stock that halved the used-car retailer’s market value so far this year. Global Payments Inc. sold $6.2 billion bonds to help fund its acquisition of Worldpay Inc., joining a wave of borrowers that have helped propel global bond issuance to a record high. Tapestry Inc. raised its full-year outlook and reported quarterly earnings that beat expectations on the strength of its Coach brand — but the shares slumped, suggesting investors were looking for more. United Parks & Resorts Inc.’s third-quarter revenue missed estimates, as weather disruptions and softer discretionary spending weighed on attendance. Deutsche Boerse AG and Nasdaq Inc. risk hefty European Union fines after the bloc’s antitrust watchdog opened a full-scale investigation into a suspected cartel linked to listing, trading and clearing of derivatives.

What Bloomberg strategists say…

“With the US government shutdown now the longest in history, and official economic indicators delayed as a result, private information on jobs is gaining in importance. And with the Fed focused on weakness in the labor market, the bond markets are uber-sensitive to the data.”

—Alyce Andres, Macro Strategist, Markets Live. For the full analysis, click here.

Some of the main moves in markets:

Stocks

The S&P 500 fell 1.1% as of 4 p.m. New York time The Nasdaq 100 fell 1.9% The Dow Jones Industrial Average fell 0.8% The MSCI World Index fell 0.7% Bloomberg Magnificent 7 Total Return Index fell 2% The Russell 2000 Index fell 1.9% Currencies

The Bloomberg Dollar Spot Index fell 0.3% The euro rose 0.5% to $1.1548 The British pound rose 0.7% to $1.3136 The Japanese yen rose 0.7% to 153.04 per dollar Cryptocurrencies

Bitcoin fell 2.8% to $100,741.04 Ether fell 4.1% to $3,299.62 Bonds

The yield on 10-year Treasuries declined seven basis points to 4.09% Germany’s 10-year yield declined two basis points to 2.65% Britain’s 10-year yield declined three basis points to 4.43% The yield on 2-year Treasuries declined seven basis points to 3.56% The yield on 30-year Treasuries declined six basis points to 4.68% Commodities

West Texas Intermediate crude was little changed Spot gold was little changed –With assistance from Denitsa Tsekova, Andre Janse van Vuuren and Anand Krishnamoorthy.

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