Dow Jones and S&P500: Tech Reversal and Layoff Spike Hit Stock Market Forecast

Dow Slumps as AI Trade Unwinds, Layoff Surge Sparks Growth Jitters

Stocks sold off into midday Thursday, with the Dow down over 400 points as traders pulled capital from overstretched tech names and braced for fallout from a brutal round of October layoffs.

The Nasdaq tumbled nearly 1.8%, and the S&P 500 shed just over 1%. Investors took a step back from the high flyers of 2025, rattled by lofty valuations, weak forward guidance, and fresh signs of economic strain.

Why Are Traders Dumping the AI Darlings Again?

Salesforce, NVIDIA, Microsoft — the usual suspects in the AI trade — led the decline, each hit hard as investors questioned just how much good news is already priced in. The tone from earnings has been clear: strong revenue isn’t cutting it if margins or guidance disappoint. And in this market, there’s not much forgiveness.

Salesforce cratered 6% after a mixed earnings readout, while NVIDIA slipped nearly 4% as traders booked gains. It’s a shift from chasing the growth story to questioning sustainability — especially at valuations where “perfect” is the baseline.

What Does the October Layoff Spike Mean for the Economy?

The Challenger report showed 153,074 job cuts in October — nearly triple September’s figure and the worst October print in over two decades. That’s not just a red flag; it’s a siren. And with official labor data partially frozen by the government shutdown, private reports like this carry even more weight.

The surge in layoffs is feeding into a growing concern: maybe the labor market isn’t as resilient as it looked. Add in cautious corporate guidance and consumers already stretched by inflation, and traders have reason to worry the slowdown’s finally hitting the real economy.

Any Relief in Sight from Washington or the Fed?

Treasury yields pulled back, with the 10-year drifting to 4.08%, as bond buyers moved to safety on the weak labor signal. Meanwhile, the Supreme Court appeared skeptical of the Trump administration’s tariff authority — a ruling against it could lift some trade headwinds, potentially helping stocks. But that’s a longer-term catalyst, not a fix for Thursday’s selloff.

The shutdown — now in its 37th day — continues to cloud the outlook. And while President Trump’s new drug pricing deal with Eli Lilly and Novo Nordisk grabbed headlines, it wasn’t enough to shift the mood.

Defensive Dow names like Merck and Procter & Gamble managed modest gains, but the weight of tech losses proved too much.

Into the Close — Does This Market Find Its Feet?

Right now, it’s a heavy session with little help from earnings or Washington. Defensive names are holding up — Merck, Chevron, and Coca-Cola are in the green — but leadership is thin.

If tech continues to roll and layoffs stay in focus, the final stretch could bring more selling. The question now: do buyers defend the dip, or step aside into the weekend?

More Information in our Economic Calendar.