The calm didn't last. After a quiet morning that saw major indexes treading water through midday, tech stocks decided to remind everyone why November has been painful. Selling pressure accelerated in the afternoon, dragging the market lower with AI and semiconductor names absorbing the worst of it.
The Nasdaq 100 closed down 0.83% at 24,799 on Monday, bringing its month-to-date decline to 4.3%—the index's worst monthly performance since March. The S&P 500 wasn't much better, falling 0.92% to 6,672. This comes on the heels of tech's worst week since the tariff chaos back in April.
Fed Officials Talk, Markets Listen
The latest selloff appears tied to evaporating hopes for a December rate cut. Just last week, markets were basically flipping a coin on whether the Fed would cut or hold at its December 10 meeting. Now? The CME FedWatch Tool shows a 55% probability the Fed keeps rates steady at 3.75%-4.00%.
What changed the calculus? Fed Vice Chair Philip N. Jefferson spoke at the Federal Reserve Bank of Kansas City and threw some cold water on rate cut enthusiasm. "The current policy stance is still somewhat restrictive, but we have moved it closer to its neutral level," Jefferson said, adding that policymakers need "to proceed slowly" as they navigate evolving risks between inflation and employment. He also noted uncertainty around how much data they'll actually see before the next meeting—hardly the language of someone eager to cut.
Meanwhile, Governor Christopher Waller offered a different take during remarks in London at the Society of Professional Economists Annual Dinner. Waller made the case for continuing rate cuts, arguing that "the labor market is still weak and near stall speed." On tariffs, he suggested they're causing "a one-time price shock, not persistent inflation"—a more dovish interpretation that didn't seem to sway markets much.
Adding to the headline noise, President Donald Trump made aggressive comments during a White House event with FIFA officials. Asked about potential troop deployment in Venezuela, Trump said he doesn't "rule out anything regarding Venezuela, we just have to take care of the issue." On drug trafficking from Mexico, he added: "If we had to strike Mexico to stop drug flow, that's OK with me."
AI and Chip Stocks Bear the Brunt
High-growth sectors suffered most from the shifting rate outlook. The Global X Artificial Intelligence & Technology ETF (AIQ) dropped 1.6%, while the iShares Semiconductor ETF (SOXX) got crushed with a 2.6% decline.
Nvidia Corp. (NVDA) shed nearly $200 billion in market value on Monday—yes, billion with a B—even after Wells Fargo boosted its price target from $220 to $265. All eyes are on Wednesday's after-hours earnings report, which could either stabilize sentiment or accelerate the selling.
Palantir Technologies Inc. (PLTR) fell another 2.7% Monday, pushing its November decline past 15%. That puts the data analytics company on track for its worst month since August 2023, a stunning reversal for a stock that had been riding high on AI enthusiasm earlier this year.
The combination of stubborn Fed officials, geopolitical saber-rattling, and valuation concerns appears to be finally catching up with the year's highest-flying names. Whether this is a healthy correction or the start of something uglier probably depends on what Nvidia says Wednesday night.
