Stock market today: S&P 500 slumps on falling rate-cut odds, rotation out of tech

Investing.com -- The S&P 500 closed sharply Thursday as an ongoing rotation out of big tech and waning odds of a December rate cut weighed on sentiment even with the ending of the longest ever U.S. government shutdown. 

At 4:00 p.m. ET (21:00 GMT), the Dow Jones Industrial Average slipped 797 points, or 1.7%, the S&P 500 index dropped 1.6%, while the tech-heavy NASDAQ Composite underperformed, falling 2.3%.

December rate cut odds fall

Odds on a December rate cut fell below 50% following a flurry of Fed speak stoking caution on further rate cuts amid concerns about the lack of economic data owing to the government shutdown. 

Boston Fed President Susan Collins, a voting member of the Federal Open Market Committee said she would be  "hesitant to ease policy further, especially given the limited information on inflation due to the government shutdown."

The echoed similar remarks by Minneapolis Fed President Neel Kashkari who said the econmoic outlook is mixed as inflation ocnitnues to run higher and some sectors of the economic "look like they’re doing great."

"We think that it is possible that Powell is forced into a compromise by which the Fed either. stays on hold in December, or if it does cut, is obligated subsequently to signal that the rate cutting cycle may be over," Macquarie said in a note.

Government shutdown ends

U.S. President Donald Trump signed a bill to unlock funding and end the longest government shutdown in U.S. history late on Wednesday, after the spending package was approved by the Republican-controlled House of Representatives.

The legislation, which will keep the government funded through January 30, was passed in a 222 to 209 House vote, mostly along party lines. The Senate signed off on it earlier this week.

The end of the shutdown brings an end to a 43-day period that has sparked widespread disruptions in federal services, most notable in air traffic and travel safety staffing, which in turn saw thousands of flights being cancelled across the country, potentially weighing on economic growth in the world’s largest economy. 

It is also likely to lead to the resumption of crucial data releases used by investors and policymakers to gauge the actual impact on the health of the U.S. economy.

"With a bit of luck, we may see job numbers starting early next week," analysts at ING said in a note.

However, Trump administration officials have warned that employment and inflation for October might never be published because of the shutdown. If so, this could leave Federal Reserve officials in particular without key pieces of data before their next interest rate decision in December.

Cisco lifts annual guidance 

The tech sector has been under pressure of late, but it received some positive news with Cisco Systems (NASDAQ:CSCO) raising its annual guidance, prompted a jump higher in its stock price.

In a wager on a surge in demand for the equipment needed to underpin massive data center expansion sparked by the AI boom, the U.S. networking gear provider said it expects fiscal 2026 revenue to be between $60.2 billion and $61 billion, versus prior projections of $59 billion to $60 billion.

Full-year adjusted per-share earnings are tipped to be $4.08 to $4.14, compared to $4 to $4.06 previously.

Cisco, whose fiscal first quarter results also topped Wall Street expectations, predicted that it would rake in $3 billion in AI infrastructure revenue during its current year.

Elsewhere, Walt Disney (NYSE:DIS) stock dropped after the entertainment giant reported a drop in revenue in its fiscal fourth-quarter profit, with a tepid reception to the group’s latest slate of studio releases weigheding on returns at its key entertainment unit.

Flutter Entertainment (LON:FLTRF) stock fell as the world’s largest sports betting and gambling company cut its full-year guidance, citing winning streaks from gamblers.

Starbucks (NASDAQ:SBUX) stock slipped back after the union representing workers at the coffee giant launched a strike in at least 40 cities Thursday on Red Cup Day, one of the chain’s biggest sales days of the year.

Peter Nurse, Ambar Warrick contributed to this article