US stocks closed lower Thursday as major indexes retreated on renewed Fed rate cut worries, with the Nasdaq Composite posting the sharpest losses.
The Dow Jones Industrial Average, S&P 500 and Nasdaq all fell throughout the session as investors digested mixed economic data and shifting expectations for central bank policy.
Concerns intensified after President Trump signed a federal spending bill late Wednesday to reopen the government, offering temporary clarity but little relief for markets already uneasy about the Federal Reserve’s rate path.
Tesla’s intraday slide and volatile moves in gold and bitcoin added to the day’s turbulence, reflecting broader uncertainty across asset classes.
The latest downturn followed several weeks of speculation over when, or if, the Federal Reserve might begin easing interest rates this year.
Markets had rallied earlier in the quarter on hopes that slowing inflation would push the central bank toward cuts, but recent economic releases have clouded that outlook.
On Thursday, new labor and manufacturing figures pointed to uneven conditions. A modest uptick in jobless claims and softer factory activity suggested cooling momentum, yet not at a pace compelling enough for the Fed to fully commit to lowering rates.
The combination reinforced Fed rate cut worries that have hovered over Wall Street since the start of the month. The market is dealing with conflicting signals, said Dana Whitmore, senior economist at Horizon Analytics.
We have inflation easing in some categories but not enough for policymakers to make an unambiguous pivot. Investors are trying to price in uncertainty, and the result is volatility.
The government funding bill passed after days of tense negotiations briefly lifted sentiment but ultimately did little to offset broader macroeconomic concerns.
Analysts pointed to the adjustment of market expectations as a key driver of Thursday’s sell off. Traders had priced in up to three rate cuts earlier in the year, but that figure has steadily declined as Fed officials have reiterated their cautious stance.
“The Fed has been clear it wants more evidence of sustained progress on inflation,” said Michael Ruiz, a portfolio strategist at Crestview Capital.
That message is being absorbed more reluctantly by the market, which had gotten ahead of itself. Fed rate cut worries are now embedded in every trading session.
Ruiz added that sector performance reflected diverging narratives. Tech stocks, which are traditionally more sensitive to interest rate shifts, led declines as the Nasdaq fell more than two percent intraday. Growth names often react sharply when rate expectations swing, he said.
Meanwhile, safe haven assets fluctuated. Gold initially rose as equities weakened but later leveled out. Bitcoin, which has behaved both as a risk asset and speculative hedge in recent years, also showed choppy price action.
The Nasdaq Composite dropped 2.29 percent during intraday trading before narrowing its losses slightly at the close. The Dow dipped more modestly, slipping below the flatline for most of the session, while the S&P 500’s broad decline pulled several major sectors into negative territory.
Compared with last month’s rally, the market’s tone has shifted significantly. In mid October, futures markets projected the first rate cut as early as June.
As of Thursday, those projections have been pushed deeper into the year, with some traders bracing for no action at all. Inflation data has remained mixed.
Core consumer prices eased only marginally in the latest report, while producer prices came in hotter than expected. The combination fueled Fed rate cut worries and limited confidence that the central bank would accelerate its easing timeline.
Treasury yields reflected the caution: the ten year yield edged higher, signaling reduced expectations for imminent cuts. Mortgage rates also stabilized near recent highs, adding pressure to housing linked equities.
Beyond analysts and economists, everyday investors and business owners expressed their own concerns about the shifting economic landscape.
“People in my shop pay attention to these market swings more than ever,” said Janet Morales, owner of a family run electronics store in Phoenix.
“When stocks fall, customers pull back a bit. They’re worried about the cost of living and interest rates. You can feel the uncertainty.” In Detroit, auto technician Leonard Price said higher borrowing costs were affecting repair financing.
“Some customers rely on payment plans for big repairs,” Price said. “If interest stays high, they delay work. I’m watching the news every night hoping for clearer guidance from the Fed.”
These voices reflected the broader unease surrounding Fed rate cut worries and how market expectations extend beyond trading floors and into households.
Looking ahead, investors will turn their attention to upcoming economic releases and scheduled remarks from Federal Reserve officials. Many expect the central bank to maintain its cautious tone until inflation shows more consistent improvement.
“We’re in a wait and see period,” said economist Whitmore. “Markets will likely remain sensitive to even small changes in data or Fed communication. The path forward is contingent on how quickly inflation moves toward the two percent target.”
Corporate earnings next week may also shape sentiment. Tech companies, in particular, could face heightened scrutiny as analysts assess how borrowing costs and economic uncertainty are influencing growth projections.
Volatility is expected to persist, especially if future data further complicates the outlook for interest rates. For now, traders remain focused on the same issue driving Thursday’s declines: Fed rate cut worries and the broader trajectory of US monetary policy.
The Dow, Nasdaq and S&P 500 ended Thursday lower as investors grappled with shifting expectations for Federal Reserve policy. Mixed economic signals, sector wide declines and fluctuating commodity prices underscored an increasingly uncertain environment.
While the government funding bill provided temporary stability, concerns tied to Fed rate cut worries continued to dominate market sentiment, leaving Wall Street cautious as it awaits clearer direction in the weeks ahead.