Softening labor data boosts expectations of a December rate cut, but tech weakness signals growing caution
MARKET INSIDER – U.S. stocks were largely unchanged Thursday as investors entered a holding pattern ahead of next week’s pivotal Federal Reserve meeting, with confidence rising that policymakers will deliver a long-anticipated rate cut. The Dow and S&P 500 hovered near flat, while the Nasdaq slipped 0.1%, weighed down again by weakness in major tech names.
Mounting evidence of a cooling labor market continued to shape market psychology. A report from Challenger, Gray & Christmas showed corporate job-cut announcements pushing past one million this year, driven by restructuring, AI adoption, and tariff uncertainty. That followed ADP data on Wednesday revealing an unexpected drop in private payrolls. Together, the indicators strengthened Wall Street’s conviction that the Fed will cut its benchmark rate by 25 basis points on December 10, with markets pricing in nearly a 90% probability — a staggering shift from just weeks earlier.
Investors brushed aside Thursday’s counterintuitive weekly jobless claims report, which showed filings falling to their lowest level since 2022. Instead, attention turned to upcoming data: September’s delayed consumer spending and PCE inflation numbers, along with the University of Michigan’s December sentiment reading — all landing Friday and poised to influence the Fed’s tone.
Corporate movers were mixed. Salesforce edged higher after issuing a stronger-than-expected revenue forecast, while discount retailer Five Below rallied on a blowout earnings report. Yet the broader tech sector lagged, dragged down by declines in Microsoft, Nvidia and Broadcom. Microsoft closed 2.5% lower after a report claimed the company cut AI-linked sales targets — a story the firm later disputed, helping shares recover from intraday lows.
The pullback in AI winners has marked a subtle shift in market leadership. Analysts note that rotation into defensive sectors is emerging for the first time since April, a sign of early risk aversion even as major indices trade close to record highs. Geopolitical uncertainty also looms: Treasury Secretary Scott Bessent said the Trump administration could reassert its tariff agenda using provisions of the 1962 Trade Act — even if its current structure falters before the Supreme Court.
With few catalysts remaining before the Fed’s decision, markets appear to be catching their breath. Whether the anticipated rate cut ignites a year-end rally or exposes deeper fragilities in the AI-driven market narrative may define the final weeks of 2025.
