Tech Stocks Tumble as Fed Rate Hike Expectations Rise

Thursday’s market session witnessed a pronounced retreat across major indices as investor sentiment shifted sharply following comments from Federal Reserve officials suggesting a more cautious approach to interest rate policy. The concerning outlook slumped over previous optimistic expectations about further monetary easing.

Major Index Declines

The broad market selloff was reflected across all three major benchmarks. The S&P 500 Index fell 1.66%, while the Dow Jones Industrials declined 1.65%. The technology-heavy Nasdaq 100 faced steeper pressure, dropping 2.05%. Futures markets signaled similar weakness, with December E-mini S&P futures sliding 1.64% and December E-mini Nasdaq futures retreating 2.02%.

The primary catalyst for Thursday’s downturn centered on shifting expectations regarding the Federal Reserve’s December policy meeting. Current odds now price in only a 51% probability of a 25 basis point rate cut at the December 9-10 FOMC gathering, down substantially from 70% probability recorded the previous week. This shift represents a meaningful recalibration of market pricing for monetary policy accommodation.

Fed Officials Signal Hawkish Stance

Three prominent Federal Reserve regional presidents publicly emphasized their preference for maintaining current interest rate levels. Boston Fed President Susan Collins stated it would “likely be appropriate to keep policy rates at the current level for some time to balance the inflation and employment risks.” Cleveland Fed President Beth Hammack highlighted persistent inflationary pressures, noting “we’ve got this persistent high inflation that is sticking around,” making further cuts inadvisable without economic deterioration. St. Louis Fed President Alberto Musalem cautioned that “there’s limited room for further easing without monetary policy becoming overly accommodative.”

These dovish-pivot comments sent Treasury yields higher, with the 10-year T-note yield climbing 4.1 basis points to 4.11%, creating additional headwinds for equity valuations. December 10-year T-note futures declined 7.5 ticks on the session.

Technology and Chip Sector Leadership in Decline

The technology sector bore the brunt of Thursday’s selling pressure. Semiconductor manufacturers experienced particularly acute weakness, with ARM Holdings and Intel sliding more than 5%, while Broadcom and Lam Research each declined over 4%. Additional chip-related losses included Micron Technology, Advanced Micro Devices, Applied Materials, and KLA Corp—all down more than 3%.

The Magnificent Seven technology stocks similarly slumped, with Tesla leading losses among the group with a decline exceeding 6%. Nvidia dropped more than 3%, while Alphabet and Amazon.com each fell over 2%. Microsoft declined marginally above 1%, Apple lost 0.19%, though Meta Platforms bucked the downward trend with a modest 0.14% gain.

Corporate Earnings and Individual Stock Movements

Despite broader market weakness, Q3 earnings season delivered mixed results with nuance. Approximately 82% of the 456 S&P 500 companies that have reported exceeded consensus expectations, positioning Q3 for potentially the strongest quarter since 2021. However, earnings growth of 14.6% year-over-year substantially outpaced initial forecasts of 7.2%, raising questions about valuation sustainability.

Disappointing guidance from several companies accelerated selling. Walt Disney led S&P 500 decliners with a 7% loss following Q4 revenue guidance of $22.46 billion, below consensus estimates of $22.83 billion. Ardent Health slumped 34% after reducing full-year adjusted EBITDA projections to $530-555 million from $575-615 million. Webtoon Entertainment declined 25% on Q4 revenue guidance of $330-340 million versus consensus of $382.3 million.

Conversely, several companies rallied on positive catalysts. Sealed Air surged 17% after Clayton Dubilier & Rice disclosed exploration of a potential acquisition. Firefly Aerospace climbed 17% following Q3 revenue that exceeded forecasts. Cisco Systems advanced 4% on raised 2026 revenue guidance, while Albemarle and Nike gained on analyst upgrades.

Bond Markets and Global Equity Performance

Treasury markets experienced broad-based yield expansion alongside equity weakness. The 10-year German bund yield rose 4.4 basis points to 2.688%, while the 10-year UK gilt yield increased 3.9 basis points to 4.437%. A $25 billion auction of 30-year Treasury bonds showed weak demand with a 2.29 bid-to-cover ratio versus the 10-auction average of 2.38.

International equity markets presented mixed signals. The Euro Stoxx 50 declined 0.77% from record highs, China’s Shanghai Composite appreciated 0.73% to reach a 10-year high, and Japan’s Nikkei Stock 225 gained 0.43%.

Government Shutdown Resolution

President Trump signed legislation Wednesday evening ending the longest U.S. government shutdown in history. The measure provides full-year funding for certain departments with other agencies funded through January 30. The Congressional Budget Office projects the six-week closure will reduce current quarter real GDP growth by 1.5 percentage points, though recovery mechanisms including resumed federal programs and back-pay disbursements may recover more than half the loss in early 2025.

The delayed release of October payrolls and consumer price index data due to shutdown-related disruptions contributed to market uncertainty regarding the true state of economic conditions entering the Fed’s December policy decision.