The worst October layoffs data in 22 years is spearheading more losses in stocks
US stocks dropped sharply on Thursday as investors took in the worst layoff data for the month of October in over two decades.
Employers announced 153,074 job cuts for October, according to data from Challenger, Gray & Christmas. That represents a 183% increase from job cuts announced in September, and marked the worst October for layoff announcements the economy has seen since 2003, the firm said in a report on Thursday.
The Dow shed nearly 500 points, and the S&P 500 dropped 1%, as traders mulled over the data. However, the Nasdaq Composite outpaced the losses in other indexes, with the tech-led index falling about 2%.
The weakness is coming at a fragile time for the stock market, with investors growing nervous about tech valuations and whether AI stocks are mired in a bubble.
Valuation fears hit markets earlier in the week, and the tech selling has continued as investors take gains in some of the highest-flying growth names. Nvidia dropped 3% in afternoon trading, while Microsoft and Meta each lost 2%. The Roundhill Magnificent 7 ETF fell 1.6%. Palantir, which kicked off this week’s valuation concerns following its latest earnings report, was down another 5% on Thursday.
Here’s where US indexes stood around 1:15 p.m. ET on Wednesday:
The Challenger figures are one of the only indicators investors have of how well the job market is holding up amid the government shutdown. It comes at a time when the job market has been a key focus for investors as they try to gauge the Fed’s path for rate cuts next year.
Last month’s job cuts were largely concentrated in the tech sector, thanks to factors like slower demand and firms integrating AI, Challenger said. 33,281 layoffs were announced in the sector last month, more than five times the number of job cuts announced in the sector in September.
“Some industries are correcting after the hiring boom of the pandemic, but this comes as AI adoption, softening consumer and corporate spending, and rising costs drive belt-tightening and hiring freezes,” Andy Challenger, the firm’s chief revenue officer, said in a statement.
The job market has shown mixed signs of weakness in recent month. The private sector, for instance, added 42,000 jobs in October, ADP said on Wednesday, better than the 22,000 gain economists had expected.
One silver lining is that investors are now pricing in future rate cuts from the Fed with more certainty. The probability that the central bank will cut rates another 25 basis points in December climbed to over 70% on Thursday, up from 62% on Wednesday, according to the CME FedWatch tool.