A powerful early rally on Wall Street collapsed Thursday as renewed concerns about the durability of the artificial intelligence boom and fading expectations for a Federal Reserve rate cut sent major indexes sharply lower.
The Nasdaq composite fell about 2.2%. The S&P 500 slid 1.6%. The Dow Jones Industrial Average, up nearly 700 points at midday, reversed course and ended down almost 390 points.
Investors grew more cautious about soaring valuations in AI-related stocks, which have powered much of the market’s gains this year. Analysts warned that the rapid run-up in spending on data centers, advanced chips and AI infrastructure may not translate into profits fast enough to justify lofty share prices.
At the same time, hopes for a December interest-rate cut weakened. Mixed signals from Federal Reserve officials and recent economic data have stirred uncertainty over the central bank’s next move. Some policymakers have pointed to a softening labor market as justification for a cut, while others have advised patience.
Bitcoin also slumped, dropping below $87,000 after peaking above $120,000 earlier this fall. The slide added to the risk-off tone that swept across financial markets.
Not all sectors moved lower. Shares of Walmart rose after the retailer reported stronger-than-expected earnings, reflecting steady consumer demand even as households continue to tighten budgets.
The abrupt reversal underscored the fragile mood in markets as investors weigh still-high inflation, an uneven job market and questions about whether AI-linked growth can continue at its recent pace.
What’s Next
Wall Street will look to upcoming earnings from major technology and AI companies for clues about whether the sector can meet heightened expectations. Investors will also watch the Fed’s December meeting for signs of how officials view inflation, employment and the likelihood of rate cuts heading into next year.
