US equities attempted to recover on Friday from the worst market sell-off in more than a month, as investors recalibrated expectations around the likelihood of a Federal Reserve rate cut in December. The rebound in the S&P 500 and Nasdaq came as traders weighed the impact of the record government shutdown on economic visibility, while a sharper hawkish tone from Fed officials injected fresh uncertainty into the market landscape.

Stocks Rebound, but Rate-Cut Doubts Cast a Shadow

The Dow Jones Industrial Average edged 0.6% lower, dragged by cyclical names pressured by rising yields, while the S&P 500 turned positive with a 0.3% gain. The Nasdaq Composite rose 0.5%, supported by megacap tech names clawing back from steep intraday losses.

This modest recovery helped all three major indexes stay on track for weekly gains, despite Thursday’s sharp drop, which marked their biggest single-day decline in more than four weeks. The turbulence reflected a dramatic repricing in rate expectations: markets that had priced in a near-certain December cut just one month ago now assign less than 50% probability to such a move.

Minneapolis Fed President Neel Kashkari’s latest remarks contributed to the shift. Citing stronger-than-expected economic resilience and persistent inflation concerns, Kashkari signaled he is not yet convinced that easing is appropriate. With inflation and job-market data delayed or potentially incomplete following the six-week shutdown, policymakers now face an unusually opaque macroeconomic backdrop—one that complicates forward guidance and elevates market sensitivity to Fed communication.

Tech and Crypto Face Renewed Pressure

Tech stocks, the epicenter of Thursday’s sell-off, saw mixed trading Friday. Tesla initially fell below the critical $400 level before recovering, while Nvidia reversed losses to finish higher. The reprieve, however, comes as investors rotate out of richly valued AI beneficiaries in favor of more defensive sectors.

Crypto markets did not enjoy the same relief. Bitcoin slid below $96,000 for the first time in more than six months and remains down over 20% from October’s peak. The decline underscores a broader shift away from high-beta assets as confidence in near-term easing deteriorates.

Tariff Cuts Enter the Conversation as Inflation Pressures Mount

With voters increasingly focused on affordability, the White House is preparing a series of tariff reductions aimed at lowering food prices. President Trump and Treasury Secretary Scott Bessent have previewed new trade agreements with Argentina, Brazil, Guatemala, and other Latin American partners intended to ease import costs on items such as bananas and coffee.

While these measures may offer modest relief, economists warn that tariff-related price distortions will take time to unwind and may not meaningfully alter inflation expectations in the short term.

What Comes Next

Markets now enter a period defined primarily by uncertainty: unclear data releases, inconsistent Fed signals, and the lingering impact of shutdown-induced reporting gaps. Investors will closely monitor upcoming Fed speeches for clues on whether the central bank leans toward patience or resumes its easing path. Until clearer guidance emerges, volatility is likely to persist, with rate-sensitive sectors and high-growth equities remaining the most exposed.