TrumpMarkets
|6 min ReadWall Street Dumps Tech As Fed Caution Slams Risk Assets
Carter Hayes
Senior Analyst
Published
Jan 16, 2026
U.S. stocks just delivered their biggest one day slide in about a month. The quick hope that came after the government shutdown ended has faded. Now traders are staring at delayed economic data, a murky path for rate cuts, and a tech sector that suddenly looks very expensive. Profit taking is hitting the winners. Money is moving into cheaper, defensive names. Risk assets from tech to crypto are feeling the heat.
Bitcoin lost the six figure club, slipping back under $100,000. Ether briefly plunged more than 10 percent. When the market mood turns like this, everything tied to growth and momentum gets tested, and everybody knows it.
Biggest One Day Drop In A Month
All three major U.S. stock benchmarks fell hard on Thursday. The S&P 500 dropped 113.43 points, down 1.66 percent, to finish at 6,737.49. The Dow Jones Industrial Average fell 797.60 points, or 1.65 percent, to 47,457.22, slipping away from its record closing high. The Nasdaq Composite, packed with tech names, lost 536.102 points, down 2.29 percent, to close at 22,870.355.
The Nasdaq 100 slid as well, down 2.05 percent to 24,993.463. Small caps got hit even harder. The Russell 2000 fell 2.77 percent to 2,382.984.
Volatility surged. The VIX, Wall Street’s fear gauge, jumped 14.33 percent to 20.02. At one point in the early morning U.S. time, it spiked to 21.31 before easing back. That is what a risk-off day looks like.
The so-called Magnificent 7 tech giants also took a beating. Their combined index dropped 2.26 percent to 203.76. Tesla sank 6.64 percent. Nvidia fell 3.58 percent. Alphabet’s A shares lost 2.84 percent. Amazon dropped 2.71 percent. Microsoft slid 1.54 percent. Only Meta managed a tiny gain of 0.14 percent.
Chip stocks were deep in the red. The Philadelphia Semiconductor Index fell 3.72 percent to 6,818.736. AMD lost 4.22 percent. TSMC fell 2.90 percent. Oracle slid 4.15 percent. Broadcom dropped 4.29 percent. Qualcomm fell 1.23 percent. When chips are down like this, the growth story is clearly under attack.
Behind the tape action is a powerful rotation. Investors are cashing out of this year’s hottest trades and rotating into lower valuation, more defensive sectors. The market’s “risk-off” mode showed up clearly in Thursday’s session.
Fed Officials Talk Tough, Rate Cut Hopes Cool
The direct trigger for this selloff was a wave of cautious comments from Federal Reserve officials. Several policymakers warned about inflation and signaled that cutting rates is not something to rush.
Cleveland Fed President Loretta Hammack, a voting member next year, said she expects inflation to stay above the 2 percent target for another two to three years. With the labor market softening, the employment side of the Fed’s dual mandate is under pressure. She also warned that tariffs will push inflation higher into early next year. In her view, policy must stay restrictive to cool prices.
Minneapolis Fed President Neel Kashkari said the resilience of the economy made him oppose the last rate cut. He is now in wait-and-see mode for the December decision. St. Louis Fed President Alberto Musalem repeated that policy needs to “stand firm” against inflation.
The concern is simple. If inflation proves sticky and the job market still looks solid, there is less urgency to ease. More and more officials are signaling hesitation on further cuts, including some who previously pushed for easier policy.
The most notable shift comes from Boston Fed President Susan Collins and San Francisco Fed President Mary Daly. Both voted for cuts earlier this year. Now they are sounding more careful. Collins said the bar for more easing in the near term is “relatively high.” Daly said it is too early to decide what to do in December and stressed she is keeping an “open mind.”
A flood of delayed economic data is about to hit, thanks to the earlier government shutdown. That means more information, not less uncertainty. Combined with this streak of hawkish speeches, rate cut bets for December have been sharply repriced. According to CME data, the implied probability of a cut has fallen from over 70 percent just a week ago to around 50 percent.
Two Paths For The Next Fed Meeting
Looking ahead to the December meeting, markets now see two main paths. Either the Fed holds rates steady, or it delivers another 25 basis point cut with a tougher message about what comes next.
According to Wall Street Journal reporter Nick Timiraos, one option is that the Fed cuts in December but raises the bar for any further easing through its policy guidance. In other words, a cut paired with a strong signal that the committee will move more slowly from here.
Whatever the choice, Fed Chair Jerome Powell is likely to face more dissent than at the last meeting, when two members voted against the decision. Evercore ISI Vice Chair Krishna Guha wrote that Collins’ clear opposition to a December cut “adds to concerns” about Powell’s ability to manage internal divisions on the FOMC.
Guha laid out the political map. If the Fed cuts, Kansas City Fed President Jeffrey Schmid could be joined by Collins and Musalem and others who are skeptical of more easing. If the Fed holds, Governor Stephen Miran, who previously pushed for a larger cut, could join fellow doves Christopher Waller and Michelle Bowman in voting against a pause.
The result is a committee that is split in multiple directions. Some fear inflation. Some fear growth. All of that makes the December decision highly uncertain. Markets hate that kind of uncertainty, and Thursday showed it in real time.
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