Stocks Slide as Rate-Cut Hopes Fade and Bitcoin Plunges

A Rally Turns Into a Rout

What started as a promising day on Wall Street ended with a sharp reversal, as concerns over artificial intelligence profitability and fading hopes for a December interest-rate cut sent markets tumbling. By Thursday afternoon, the Nasdaq had dropped 2%, the S&P 500 fell more than 1.5%, and the Dow swung nearly 1,100 points from its morning high, closing down almost 390 points.

Cryptocurrency markets were hit hard as well, with bitcoin sliding below $87,000—weeks after reaching highs over $120,000—fueling broader uncertainty among retail investors.

Rate-Cut Optimism Evaporates

Early optimism surged after a strong September jobs report and blowout earnings from chip giant Nvidia—both seen as signs of economic resilience. But that same strength undercut expectations that the Federal Reserve would cut rates in December.

“The rebound in payrolls suggests diminished risks of a higher unemployment rate,” analysts at Morgan Stanley noted, saying they no longer expect next-month’s rate cut.

With borrowing costs likely to remain elevated, investors grew hesitant. When interest rates stay high, market enthusiasm tends to cool.

AI Boom Faces Scrutiny

Adding pressure, investors continued reassessing whether AI-driven companies can deliver long-term profits. Investor Michael Burry, whose warnings were dramatized in The Big Short, summarized growing doubts: “Just because something is used does not mean it is profitable.”

Cracks in the Consumer Picture

The broader economy showed mixed signals. Major companies announced layoffs, yet Walmart reported stronger-than-expected sales—driven partly by higher-income shoppers trading down, a sign of shifting consumer behavior amid ongoing inflation.

With markets hitting their lowest point since September, analysts say sentiment—not fundamentals—will determine what comes next.