Tech stocks are getting crushed again as investors rethink rate-cut odds

Selling in tech stocks continued on Friday, with investors fleeing pricey AI names and chip shares amid recalibrated expectations of more rate cuts.

US stocks slid as investors took profits in the market’s largest tech names and repriced the odds of a Fed rate cut in December after a handful of officials delivered hawkish comments about monetary policy throughout the week.

Major indexes tumbled lower early in the day, with the tech-heavy Nasdaq Composite falling more than 1% after falling by over 2% on Thursday.

Bond yields also ticked lower as investors flocked to safety. The 10-year US Treasury yield dropped three basis points to around 4.08%.

Here’s where US indexes stood shortly after the 9:30 a.m. opening bell on Friday:

• S&P 500: 6,648.17, down 1.3%
• Dow Jones Industrial Average: 46,877.21, down 1.2% (-572.70 points)
• Nasdaq composite: 22,440.89, down 1.8%

Here were some of the largest moves in the tech sector:

• Palantir: -3%
• Tesla: -4%
• Nvidia: -3%
• AMD: -5%
• Amazon: -2%
• Broadcom: -3%

The US market has had a rough week. Investors, who had already been fretting over high valuations in the tech sector, began to worry that a rate cut was less likely as they took in news that the government may not release official inflation and jobs data for October, even as the government reopens after the longest shutdown ever.

“While some investors had hoped Wednesday’s government reopening would provide much-needed clarity, the suggestion that some reports may never be published has only deepened uncertainty around what policymakers will see and how they will respond,” David Morrison, a senior market analyst at Trade Nation, wrote in a note on Friday.

“We are finally starting to see the market bumps that many investors have been waiting for, but that never came,” Rick Gardner, the CIO of RGA Investments, wrote in a note, characterizing the sell-off as a “garden variety pullback.”

What the Fed is saying

Doubts about further rate cuts grew throughout the week as Fed officials issued hawkish commentary on the outlook for monetary policy.

Minneapolis Fed President Neel Kashkari said he was still undecided on a rate cut in December, and that he didn’t support the Fed’s last 25 basis-point rate decrease.

“The anecdotal evidence and the data we got just implied to me underlying resilience in economic activity, more than I had expected,” he told Bloomberg on Thursday, adding that he could either make the case to hold or cut rate when the Fed convenes at the end of the year.

Boston Fed President Susan Collins also said she believed it “will likely be appropriate” to keep rates level “for some time” in comments on Wednesday.

The probability of another 25 basis-point rate cut in December was about 53% on Friday, down from a 94.4% probability a month ago, according to the CME FedWatch tool.