Stocks tumbled on Thursday as chances of a December rate cut appeared to fade.
The S&P 500 ended down 1.6%, the Nasdaq Composite closed lower by 2.3%, and the Russell 2000 dropped 2.9%. The Dow Jones Industrial Average also fell by 797 points after hitting a record high on Wednesday.
The tech sector was one of the worst impacted with shares of Dell Technologies falling 4.8% as Nvidia tumbled 3.8% and Palantir slid 6.5%.
The Dow, S&P and Nasdaq are still up double-digit percentage points for the year, while the Russell, which tracks smaller companies, has increased nearly 7% in 2025.
Traders are currently betting on a less than 50% chance of a rate cut at the Fed’s next meeting, down from more than 90% just two weeks ago, before Federal Reserve Chair Jerome Powell surprised markets on Oct. 29 by saying that “a further reduction in the policy rate at the December meeting is not a foregone conclusion.”
In recent days, Fed officials have sounded split regarding interest in another rate reduction.
Fed governors Lisa Cook and Philip Jefferson, as well as regional presidents Alberto Musalem and Austan Goolsbee, have sounded a cautious tone, indicating they may be more inclined to vote for a pause in rate cuts. It could also indicate that if they do decide a cut is the right decision, it might be a small, quarter-point decrease.
Additionally, Boston Fed President Susan Collins and Kansas City Fed President Jeffrey Schmid have made comments that indicate they would be highly likely to vote for a pause.
“I see several reasons to have a relatively high bar for additional easing in the near term,” Collins said Wednesday.
Collins’ comments raised the “level of concern about Powell’s struggle to manage deep divisions within the FOMC and creates additional uncertainty over the path of rates,” Evercore ISI analyst Krishna Guha wrote Thursday.
Those voices appear to be crowding out those who support another cut.
Fed governors Michelle Bowman and Christopher Waller, who have been in favor of cuts for months, as well as newly installed governor Stephen Miran, have said that they are continuing to lean in that direction. Miran is currently on an unpaid leave of absence from a role in President Donald Trump’s White House Council of Economic Advisers.
The lack of official government data due to the shutdown is also clouding the picture.
Powell likened the lack of fresh data to descending fog, saying, “What do you do if you’re driving in the fog? You slow down.”
Due to the shutdown, which ended Wednesday night, the two most recent jobs reports have not been issued, nor has the most recent inflation data.
“These developments chip away at our confidence the Fed will cut in Dec.,” Guha wrote.
The White House said Wednesday that September’s jobs report would be issued after the government reopened, but it was possible that October’s may not be.
Economists have widely expected that inflation data from October may never be released due to the lack of government workers in the field collecting those inputs.
