The US stock market experienced its most significant intraday reversal since April Thursday, with the Nasdaq-100 Index falling 2.4% and the S&P 500 Index dropping 1.6%, wiping out more than $2.7 trillion in market value. Theories for the sell-off include concerns about the profitability of AI projects, a strong jobs report suggesting the Federal Reserve might not cut interest rates, and a significant drop i n bitcoin.

The US economy added 119,000 jobs in September, surpassing expectations, according to a delayed Bureau of Labor Statistics report. However, the unemployment rate rose to 4.4%. The mixed results could perpetuate the uncertainty surrounding the Federal Reserve's upcoming December policy meeting. "This isn't going to change anybody's mind," said David Seif of Nomura.

Federal Reserve Governor Lisa Cook warned that the increasing use of leveraged basis trades by hedge funds in the $30 trillion Treasury market could heighten vulnerability during periods of stress. The strategy, which seeks to profit from small price gaps between cash Treasuries and futures, has grown rapidly and may amplify instability or disrupt market functioning in extreme conditions, she said. "Outside of episodes of stress, relative value trades substantially improve the efficiency and liquidity of Treasury securities and related markets," said Cook. "Yet, during episodes of stress, the unwinding of crowded positions in such trades could magnify instability in these markets."

US Treasury yields fell as traders increased bets on a Federal Reserve interest-rate cut next month following a mixed jobs report. The unemployment rate rose to 4.4%, the highest in nearly four years, even as job growth increased. The yield on two-year notes dropped to a two-week low of 3.55%. However, some Fed officials have expressed caution about further easing, citing elevated inflation.

Vanguard's fixed-income chief, Sara Devereux, says the Federal Reserve will likely cut interest rates only once or twice following two quarter-point reductions this fall, contrary to Wall Street's expectations of three to four cuts by 2026. Devereux says robust growth fueled by artificial intelligence spending will limit the Fed's ability to ease policy without stoking inflation, and she also warns that corporate debt prices may face pressure from a surge in bond issuance.

Coinbase's unreleased prediction markets platform was revealed to the public after tech researcher Jane Manchun Wong leaked screenshots showing a wide array of event contracts and a partnership with Kalshi. Within a day of the leak, Coinbase removed public access to the feature, marking the company's second major leak since September.

Goldman Sachs' John Flood attributes Thursday's dramatic US stock reversal to intense hedging and risk aversion despite Nvidia's strong earnings. The S&P 500 swung from a 1.9% gain to a 1.1% loss, erasing more than $2 trillion in value. Flood notes poor liquidity and increased shorting across macro products, but he says similar past reversals have led to positive performance in subsequent weeks.