Nasdaq Enters Correction as Fed Hike Odds Drop to 68%

Nasdaq Falls Into Correction Territory

The Nasdaq Composite dropped 5.52% on Thursday, closing at 24,315. This decline pushed the index into correction territory, a technical status defined by a fall of 10% or more from its recent peak. The current closing price stands approximately 12% below the index’s record high set on October 6.

Chip stocks led the broader selloff. The market downturn occurred following political results in the United States, where Democrats secured victories in both chambers of Congress and governor races in major data center states. Bitcoin (BTC) also declined during Thursday’s selloff, falling alongside tech stocks.

Historical Recovery Patterns

Despite the immediate drop, historical data suggests a potential for recovery. According to CNBC data, the Nasdaq traded higher six months after entering correction territory in nine of its previous 10 such instances. Measured from the first close in correction territory, these 10 cases averaged a 17.03% gain over the subsequent six months. However, the first month following the entry into correction was negative in four of the 10 cases.

Recent history provides mixed examples. In March 2025, the index dropped 13.73% over the following month but stood 20.1% higher after six months. January 2022 remains the lone exception in the dataset where the index did not recover; it was 18.32% lower six months later and 24.32% lower after a year.

Fed Policy and Market Expectations

The path for market recovery is closely tied to Federal Reserve policy. The Fed raised its benchmark interest rate range to 3.75%–4.00% in September, marking its first hike since 2023. Policymakers held rates steady in October, although Governor Lisa Cook and Cleveland Fed President Beth Hammack voted for an additional quarter-point increase.

Market expectations for further tightening have shifted. CME FedWatch data indicated that the odds of a December rate hike stood at 82.7% on Wednesday. By Thursday, those odds had decreased to 68.1%. The Fed’s next decision is scheduled for December 9. BMO Capital Markets economist Jennifer Lee argued that a falling stock market could effectively do some of the work for the Fed by cooling economic activity.

In 2018, the Fed raised rates four times, including in December, before the October correction recovered after the Fed signaled a pause in January 2019. In 2022, the Fed raised rates seven times. The October jobs report is due Friday. According to FactSet, economists expect 65,000 new jobs and a 4.2% unemployment rate.