A wave of anxiety over the health of the U.S. economy triggered a sharp sell-off on Wall Street, with major indices closing significantly lower. Investor sentiment soured amid fresh reports of widespread corporate layoffs and hiring freezes, compounding existing concerns about overheated technology valuations and a lack of critical economic data.
The S&P 500 dropped 1.1%, while the technology-focused Nasdaq Composite fell nearly 2%. The downturn reflected growing unease that the economic expansion is losing momentum, as businesses appear to be retrenching.
A closely watched private-sector report revealed that October witnessed the highest number of job cut announcements for that month in over two decades. According to the data, employers announced plans to eliminate over 153,000 positions last month, a figure nearly triple that of the previous year. For the year to date, planned job cuts have surged by 44% compared to the same period last year, with the technology sector leading the reductions.
The absence of official government employment and inflation statistics, due to an ongoing federal shutdown, has left investors and policymakers navigating in the dark. This data blackout has forced the Federal Reserve to assess the economic landscape with only partial information as it contemplates future interest rate decisions. One Fed official publicly expressed heightened caution, suggesting a need to proceed slowly when the economic picture is unclear.
Market analysts pointed to a combination of factors driving the decline. Beyond the jobs data, investors are grappling with the potential for a significant correction in the shares of companies that have seen massive rallies driven by artificial intelligence investments. There is a palpable concern that valuations in the tech sector have become detached from fundamentals.
“Earnings season for major tech firms has largely passed, but doubts persist about whether current sky-high valuations are justified, especially given the enormous capital being funneled into AI initiatives,” noted one financial analyst.
Political uncertainty also contributed to the jittery atmosphere, as markets await a Supreme Court review that could impact former presidential trade policies. Analysts suggest that a ruling to roll back certain tariffs could eventually ease some inflationary pressures, though any resolution is weeks away.
The sell-off had a global echo. In Europe, major indices including the FTSE 100 and Germany’s DAX also closed in negative territory, with technology stocks bearing the brunt of the losses across the continent.