U.S. stock markets experienced a significant downturn on Thursday, driven by disconcerting layoff data that revealed the highest number of job cuts in October in over two decades. According to Challenger, Gray & Christmas, employers announced a staggering 153,074 job cuts for October, marking a dramatic 183% increase from September’s figures. This surge represents the worst October for layoffs since 2003, casting a shadow over investor sentiment.
The Dow Jones Industrial Average fell nearly 500 points, while the S&P 500 dipped by 1%. The Nasdaq Composite, which is heavily weighted towards technology stocks, saw even steeper losses, dropping around 2%. This decline comes at a precarious time for the market, as investors grapple with concerns about overvaluations in the tech sector, particularly surrounding artificial intelligence (AI) stocks. Just days earlier, apprehension over tech valuations had already initiated a sell-off in high-growth stocks, and the trend continued with notable drops in shares of major tech players. Nvidia fell 3%, and both Microsoft and Meta experienced losses of 2%. Additionally, the Roundhill Magnificent 7 ETF declined by 1.6%, and Palantir, which sparked valuation concerns with its recent earnings report, saw its shares plummet another 5%.
The layoff figures provided by Challenger, which represent one of the few metrics investors have to evaluate the job market’s stability amid ongoing governmental challenges, are particularly significant as investors closely monitor the job market in relation to the Federal Reserve’s projected path for interest rate cuts in the coming year. October’s layoffs were predominantly concentrated in the technology sector, attributed to factors including diminished demand and corporate adaptations to AI, with a notable 33,281 layoffs recorded in tech—over five times the number in September.
Andy Challenger, the firm’s chief revenue officer, noted in a statement that some industries are experiencing corrections following the pandemic hiring surge. He attributed the layoffs to a combination of factors, including AI adoption, declining consumer and corporate spending, and rising operational costs—all contributing to increased cost-cutting measures and hiring freezes.
Despite these concerns, there was a glimmer of optimism as the private sector reported the addition of 42,000 jobs in October, surpassing economists’ expectations of a 22,000 gain, according to ADP. Furthermore, investors appeared to be adjusting their expectations for future actions from the Federal Reserve. The probability of a 25-basis-point rate cut in December surged to over 70%, up from 62% just a day prior, as indicated by the CME FedWatch tool.
As the day progressed, market participants continued to confront a landscape laden with uncertainty, influenced heavily by fluctuating job data and broader economic signals.
