Market Selloff Intensifies as Tech Gains Evaporate, Volatility Index Hits Four-Month Peak

Equities retreated sharply as the afternoon session unfolded, with major indices surrendering earlier momentum sparked by Nvidia’s impressive earnings results. The S&P 500 Index slipped -0.19%, while the Nasdaq 100 fell -0.49% and the Dow Jones Industrials declined -0.21%. December E-mini contracts followed suit, with S&P futures down -0.43% and Nasdaq futures off -0.69%.

The reversal came despite Nvidia’s strong performance, which initially lifted sentiment. The chip designer reported Q3 revenue of $57.01 billion, surpassing consensus estimates of $55.19 billion, and guided Q4 revenue to $65 billion (±2%), above the $62 billion consensus. However, the company’s gains proved fleeting, erasing intraday advances to trade in negative territory by day’s end.

The VIX volatility index surged 19% intraday to reach its highest level since mid-October, signaling heightened investor anxiety despite the broader market’s initially optimistic open. This spike in the VIX reflects shifting sentiment as traders reassess risk exposures following mixed economic signals.

Economic Data Fuels Rate-Cut Optimism, But Hawkish Pushback Complicates Picture

Labor market figures delivered conflicting signals. September nonfarm payrolls came in at +119,000, doubling expectations of +51,000 and suggesting underlying employment strength. However, the jobless rate unexpectedly rose +0.1 percentage points to 4.4%—a nearly four-year high—while continuing unemployment claims reached 1.974 million, the highest level in four years, indicating difficulty for the already-unemployed in securing positions.

This divergence sparked sharp reversals in bond markets. December 10-year Treasury notes climbed +4 ticks, driving yields down -1.9 basis points to 4.117%, as traders priced in increased odds of a December Fed rate cut. CME FedWatch data showed cut probabilities jumping to 39.6% from 30.1% just two days earlier.

Yet Cleveland Fed President Beth Hammack pushed back against this narrative, stating: “Lowering interest rates to support the labor market risks prolonging elevated inflation and could encourage risk-taking in financial markets.” Her hawkish commentary limited bond gains and weighed on equities.

September average hourly earnings remained flat month-over-month at +3.8% year-over-year, beating expectations of +3.7%. Housing data proved mixed: existing home sales rose 1.2% monthly to an 8-month high of 4.10 million units, while the Philadelphia Fed’s November business outlook survey weakened to -1.7 from prior readings, below the expected +1.0 uptick.

Consumer Strength Contrasts with Tech Volatility

Walmart emerged as a clear winner, rallying more than 5% after Q3 results demonstrated resilient consumer spending. The retailer raised its 2026 net sales growth guidance to +4.8% to +5.1%, up from the prior +3.75% to 4.75% outlook.

Semiconductor and AI infrastructure stocks initially climbed on Nvidia’s robust forecast before reversing course alongside the broader tech decline. Broadcom barely held positive territory, while ARM Holdings, Intel, and Marvell Technology all traded in the red. Advanced Micro Devices plummeted roughly 5%, with Applied Materials and Qualcomm also under pressure. KLA, GlobalFoundries, and Lam Research similarly declined.

The mega-cap technology complex showed mixed resilience. Tesla, Apple, and Alphabet held narrow gains, though Meta Platforms, Amazon, and Microsoft—down over 1%—surrendered momentum. The divergence highlighted investor caution as earnings season winds down.

Pharmaceutical stocks fared better. Regeneron Pharmaceuticals surged over 5% following FDA approval of EYLEA HD for macular edema treatment. PACS Group rocketed 56% higher after completing its restatement and audit, reporting Q3 revenue of $1.34 billion, up 31% annually.

Earnings Season Nearing Completion with Strong Overall Results

As Q3 corporate earnings season draws to a close with 460 of 500 S&P companies having reported, 82% have beaten forecasts—on pace for the best quarter since 2021. Overall Q3 earnings surged +14.6%, more than doubling the +7.2% year-over-year expectation.

Notable disappointments included Bath & Body Works, which tanked 25% after reporting Q3 sales of $1.59 billion below the $1.63 billion consensus and slashing full-year EPS guidance to $2.83 from $3.28-$3.53. Jacobs Solutions fell 8% on Q3 revenue of $3.15 billion, marginally below the $3.16 billion forecast. Datadog dropped 7% as analysts flagged competitive risks following Palo Alto Networks’ $3.35 billion acquisition of Chronosphere.

International Markets and Fixed Income Divergence

Overseas equity markets remained mixed. Europe’s Euro Stoxx 50 climbed 1.42%, while Japan’s Nikkei 225 surged 2.65%. China’s Shanghai Composite slipped -0.40%, reflecting divergent regional momentum.

European fixed income saw yields rise. The 10-year German bund yield reached a six-week high of 2.742%, up 1.8 basis points. The UK’s 10-year gilt yield retreated slightly to 4.595%, down -0.7 basis points from a five-week high. ECB Governing Council member Makhlouf signaled rates are in a “good place,” with swaps pricing just a 2% probability of a -25 basis point cut at the December 18 policy meeting.

Understanding Volatility: What VIX Movements Mean for Traders

The sharp VIX spike to four-month highs underscores how quickly sentiment can shift in equity markets. Investors monitoring the VIX can potentially purchase VIX exposure through various instruments—including VIX futures, options, and exchange-traded products—to hedge portfolio risk during periods of heightened uncertainty. Understanding how to buy VIX products or structure VIX positions has become increasingly important as intraday reversals like today’s demonstrate the market’s sensitivity to data surprises and Fed communications. A VIX reading in the upper teens signals meaningful apprehension among institutional investors, reflected in today’s afternoon selloff despite strong corporate earnings momentum.

This week’s economic calendar remains heavy, with delayed reports expected through Friday, including ISM manufacturing and services PMI data, University of Michigan consumer sentiment, and Kansas City Fed services activity. Initial unemployment claims fell to 220,000 from expectations of 227,000, reinforcing the mixed labor market message.