Stock market today: Dow slides, Nasdaq recovers amid growing doubts on Fed rate-cut path

US equities, led by the S&P 500 and Nasdaq, staged a recovery Friday after a steep sell-off, driven by ebbing confidence in a December Fed rate cut (now below 50% odds) due to hawkish official remarks and economic resilience, exacerbated by data uncertainty from the government shutdown. Despite tech stock rebounds, Bitcoin continued its significant decline, falling below $96,000 with substantial ETF outflows. Globally, China's October economic momentum slowed, and Walmart shares fell on CEO retirement news. However, UBS strategists maintain a bullish long-term outlook, projecting the S&P 500 to 7,300 by June 2026, anticipating continued data-dependent Fed rate cuts despite current hawkish rhetoric.

Analysis

US equities staged a partial recovery on Friday, with the S&P 500 rising 0.3% and Nasdaq gaining 0.5%, following Wall Street's steepest sell-off in over a month. This rebound occurred amidst a significant shift in monetary policy expectations, as traders now assign less than 50% odds to a December rate cut, down from 95% a month prior, driven by hawkish Fed rhetoric and economic resilience. The overall market sentiment remains mixed and uncertain, reflecting these conflicting signals.

Technology stocks, including Nvidia (+1.2%) and Tesla (rebounding to positive after breaking below $400), largely pared earlier losses, though Oracle (-1%) and Applied Materials (-5%) faced headwinds. Conversely, Bitcoin (BTC-USD) continued its sharp decline, falling below $96,000 and registering over 20% down from its October peak, exacerbated by $870 million in ETF outflows. Gold (GC=F) saw a price increase, benefiting from safe-haven demand amid government shutdown instability.

Company-specific news included Walmart's (-2.5%) stock drop following CEO Doug McMillon's retirement announcement, while Micron (+6.8%) led a jump in chip stocks. Internationally, China's economic momentum cooled in October, with retail sales growth slowing to 2.9% and industrial production to 4.9%, indicating broader global economic deceleration.

Despite the immediate volatility and policy uncertainty, UBS strategists maintain a bullish long-term outlook, projecting the S&P 500 to reach 7,300 by June 2026. They anticipate the Federal Reserve will likely continue its rate-cutting cycle, contingent on inflation remaining under control and data availability, suggesting that current hawkish rhetoric may not translate into a sustained pause.

Key Decisions for Investors

• Monitor Federal Reserve communications closely for further shifts in rate policy expectations, as data dependency remains key despite current hawkish tones.
• Consider the divergence in tech sector performance, favoring companies with strong fundamentals over those facing specific operational or investor concerns.
• Exercise caution in cryptocurrency exposure, particularly Bitcoin, given its significant price depreciation and sustained ETF outflows, indicating a bear market regime.
• Evaluate portfolio allocations for defensive assets like gold, which may offer stability amidst ongoing economic and policy uncertainty.
• Assess exposure to Chinese equities, considering the recent slowdown in key economic indicators like retail sales and industrial production.