HomeFinanceStocks fall for the third day in a row. Is this the...
Stocks fall for the third day in a row. Is this the start of a deeper pullback?
Is this the stock-market pullback investors have been waiting for? – angela weiss/Agence France-Presse/Getty Images
This isn’t the script markets were meant to follow after a rate cut by the Federal Reserve.
Rather than riding upside momentum a week after the Fed resumed cutting interest rates following a nine-month pause, U.S. stocks reversed their uptrend with a three-day losing streak, leaving investors wondering what they’ve missed and whether the bull-market rally has run out of steam.
U.S. stocks finished lower Thursday afternoon, with all three major indexes booking a three-day losing streak. The S&P 500 SPX shed 1.3% over the past three sessions to book it longest losing streak in nearly two months, while the Nasdaq Composite COMP was off 1.8% and the Dow Jones Industrial Average DJIA dropped 0.9% in the same period, according to FactSet data.
It also marked the first time since March 28 that all three stock indexes declined for three straight days, according to Dow Jones Market Data.
The pullback followed a relatively quiet first half of the week for economic data, with markets drifting lower in quiet trading. That dynamic intensified on Thursday morning, when a wave of stronger-than-expected economic data suggested that labor-market conditions were improving, reshaping market expectations around the Fed’s future policy path and driving renewed volatility across financial markets.
“Today’s story is ‘good news is bad,’” said Bob Savage, head of markets macro strategy at Bank of New York Mellon. “There is a narrow window of faith that the Fed could deliver four to six rate cuts and avert a recession, and you need just the right data set for that to happen,” he said.
“However, when you have GDP at 3.8% in the second quarter, and jobless claims below 250,000, it’s really hard to believe the Fed is going to deliver more than three or four cuts, and that changes the arithmetic for [an asset’s] holding value,” Savage told MarketWatch in a phone interview on Thursday.
See: Wall Street is starting to rethink the need for multiple rate cuts into 2026
The strength of the U.S. economic data on Thursday led to a small recalibration of interest-rate expectations. Fed-funds futures traders priced in an 83% probability of a quarter-point rate reduction in late October, down from over 90% in the previous session. Market expectations for a December cut were also scaled back, according to the CME FedWatch Tool.
The stock market has been on a seemingly relentless record-setting climb since early August, fueling growing speculation that the rally may be overdone, particularly given the stretched valuations of megacap technology names that have driven much of the market’s gains so far in 2025.
That concern has even been echoed by Fed Chair Jerome Powell, who on Tuesday cautioned that stocks were “fairly highly valued,” raising concerns about the sustainability of the artificial-intelligence trade.
The megacap technology names were leading the decline on Wall Street this week, with the Roundhill Magnificent Seven exchange-traded fund MAGS, which tracks the performance of seven large-cap Big Tech stocks —Apple Inc. AAPL , Microsoft Corp. MSFT, Google parent Alphabet Inc. GOOG GOOGL, Amazon.com Inc. AMZN, Nvidia Corp. NVDA, Tesla Inc. TSLA and Meta Platforms Inc. META — tumbling by over 1.6% so far this week, according to FactSet data.
Oracle Corp. ORCL, the highflying stock that has surged nearly 30% so far in September, has also started giving back some of those gains this week, even after OpenAI announced that it plans to build five new AI data centers with partners Oracle and SoftBank JP:9984 through its Stargate project.
Jonathan Krinsky, chief market technician at BTIG, said U.S. stocks are currently at their most vulnerable levels since April lows.
The S&P 500 hasn’t dropped 3% or more from a recent high since April, and the large-cap index hasn’t fallen back to test its 50-day moving average — a key technical level often used to assess the medium-term trend of a stock, Krinsky said in a Thursday client note (see chart below).
SOURCE: BTIG, BLOOMBERG –
If the S&P 500 were to drop down to its 50-DMA, currently at around 6,446, that would mark the largest pullback since April, but it would be a modest 3.8% off the highs and in line with seasonal trends seen in 18 of the past 20 years, Krinsky said.
“Ultimately this should set up an attractive entry point for a rally into the year-end, but that’s likely lower than current prices,” he added.
After the market defied seasonal weakness in September, October could prove to be a tougher month for stocks, especially if cracks start to appear in the narrative around Fed rate cuts, said Kathleen Brooks, research director at XTB.
“There is one question that could limit enthusiasm for stocks in the coming days: Does an economy that is growing at a 3.8% annualized rate really need four further rate cuts in the next year?” Brooks said.
U.S. stocks finished lower on Thursday afternoon. The Dow fell by more than 170 points, or 0.4%, while the S&P 500 and the Nasdaq were each off 0.5%, according to FactSet data.
