U.S. stock markets experienced a significant downturn as valuation concerns surrounding artificial intelligence (AI) stocks resurfaced. Compounding this situation, the ongoing government shutdown has led to diminished market confidence, particularly in riskier assets like equities, further exacerbated by subpar labor market data. Consequently, all three major stock indexes ended the day in negative territory.
The Dow Jones Industrial Average (DJI) dropped 0.8%, losing 398.70 points to settle at 46,912.30. Notably, 20 of the 30 components in the index concluded the day in the red, while 10 managed to stay positive. Salesforce Inc. emerged as the primary laggard within the blue-chip index, with its stock falling by 5.3%. Currently, Salesforce holds a Zacks Rank of #3 (Hold).
The tech-heavy Nasdaq Composite experienced an even steeper decline, closing at 23,053.99, down 1.9% or 445.81 points. This drop was largely attributed to poor performances from key AI infrastructure companies. The S&P 500 also slipped, descending 1.1% to end at 6,720.32. Among its 11 broad sectors, nine concluded in negative territory, while only two saw gains. The Consumer Discretionary Select Sector SPDR (XLY) and the Technology Select Sector SPDR (XLK) fell by 2.3% and 2%, respectively, while the Energy Select Sector SPDR (XLE) rose by 1%.
The CBOE Volatility Index (VIX), often referred to as the fear gauge, rose by 8.3% to 19.50. Trading volume totaled 20.77 billion shares on Thursday, slightly below the 20-session average of 20.99 billion. Additionally, declining stocks outnumbered advancing ones on the NYSE by a ratio of 1.97-to-1, and the Nasdaq showed an even wider disparity at 2.69-to-1.
Profit-taking among investors focused on AI infrastructure developers has become a notable trend, driven by anxieties surrounding the inflated valuations in the sector. Prominent figures in the financial industry have echoed these concerns, including JPMorgan Chase CEO Jamie Dimon, who cautioned against a potential stock market correction within the next six months to two years. Likewise, Goldman Sachs’ CEO David Solomon estimated a likelihood of a 10% to 20% drawdown in equity markets over the upcoming two years, while Morgan Stanley CEO Ted Pick welcomed the possibility of 10% to 15% corrections independent of broader macroeconomic pressures.
The remarkable bull run on Wall Street over the past three years has largely been fueled by the explosive growth of AI-related stocks. However, a considerable segment of financial analysts and economists has warned of potential challenges ahead for the AI boom.
Adding to the market’s woes is the ongoing government shutdown, which has now stretched into a historic 38 days—the longest in the nation’s history. Negotiations between Congress, comprised of both Republicans and Democrats, have stalled, preventing the passage of critical stopgap funding. This impasse has left policymakers, investors, and traders in a state of uncertainty due to the absence of key economic data, with Federal Reserve officials particularly impacted by this lack of information. The shutdown has necessitated that many government employees remain furloughed or work essential positions without pay.
In terms of labor market metrics, outplacement firm Challenger, Gray & Christmas reported a staggering 153,074 job cuts in the U.S. for October, reflecting an 183% increase sequentially and a 175% rise year over year—the highest recorded for any October since 2003. The report indicated that 2025 could be the worst year for job layoffs since 2009. The technology sector experienced the highest number of job cuts, shedding 33,281 positions due to restructuring related to AI integration. Furthermore, workforce analytics company Revelio Labs revealed that the U.S. economy retrenched 9,100 jobs in October, with most losses originating in the government sector.
