Markets took a serious dive Thursday, even though the government shutdown finally ended. The Federal Reserve had been widely expected to cut interest rates in December, a move investors had baked into many tech and growth-stock valuations. But now that bet looks shaky.
The key trigger: confidence in the rate cut dropped. Market tools show the chances of a December quarter-point cut have fallen to around 50 % (down from roughly 60 % earlier and as high as 95 % last month).
Several factors are feeding the uncertainty. First, the multi-week government shutdown delayed or cancelled crucial economic data releases inflation figures, jobs numbers, household survey responses leaving both investors and the Fed “flying blind”.
Second, some Fed officials have signalled caution. They’re worried about sticky inflation, still-tight labour markets and the risk of easing policy too soon. That’s spooked investors who assumed the next move would be easier policy.
So how did this translate into the sell-off? High-valuation tech and “AI boom” stocks led the way down: major names like Nvidia, Tesla, Palantir Technologies and Broadcom each fell by several percent as investors reassessed their growth-justified valuations under the lens of higher interest rates.
When borrowing costs remain high, future earnings become less valuable today and that especially hurts companies whose valuations assume big growth far out in the future. The idea of a rate cut had been a tailwind for growth stocks; losing that wind means headwinds.
What should you watch now? Keep an eye on upcoming inflation and jobs data once full reporting resumes, since missing or weak data could sway the Fed’s decision. Also watch whether sectors rotate: value, defensive and cyclicals may outperform growth if the interest-rate risk persists.
In short, markets weren’t just reacting to one headline they’re facing a broader rethink. The countdown to December changed: a rate cut is no longer a sure thing, and that uncertainty is enough to shake the pillars of the rally.
