A burst of early optimism on Wall Street quickly evaporated Thursday as fading expectations of a December interest-rate cut and continued weakness in bitcoin triggered a broad sell-off.

What began as a strong rally turned into a sharp market downturn, reflecting growing investor doubts about the durability of the artificial intelligence boom and skepticism about near-term support from the Federal Reserve.

The Nasdaq slid 2%, the S&P 500 dropped more than 1.5%, and the Dow Jones Industrial Average — up 700 points earlier in the day — ended nearly 390 points lower. Cryptocurrencies also continued to unravel, with bitcoin falling below $87,000 just weeks after topping $120,000.

The dramatic reversal added fresh anxiety to an economy already facing persistent inflation, softening job trends and rising caution among households. With consumer spending increasingly driven by wealthier Americans, a prolonged market slump could put additional pressure on the broader economy.

“You don’t need an historic bubble for an overpriced market to decline,” said Matt Maley, chief market strategist at Miller Tabak.

Markets initially surged after a stronger-than-expected September jobs report signaled economic resilience. Stocks were already positioned to climb following upbeat earnings and revenue from Nvidia, the AI chipmaker whose performance has fueled much of the sector’s recent momentum.

By midday, however, sentiment had flipped. The solid jobs data lowered the likelihood of a rate cut next month, dimming hopes for cheaper borrowing costs that often spur investment into stocks.

“The rebound in payrolls reduces the chances of a worsening unemployment rate,” Morgan Stanley analysts wrote. “We no longer anticipate a Fed cut in December.”

Worries about the profitability of AI-driven companies further weighed on investors. On Wednesday night, investor Michael Burry cautioned on X that heavy use of AI chips does not necessarily translate into higher profits.

Adding to the unease, bitcoin’s continued slide suggested that retail traders — long a driving force behind buying dips — might be losing confidence.

“I wouldn't say we’ve gone from bullish to bearish,” said Steve Sosnick, chief strategist at Interactive Brokers. “It’s more like we’ve shifted from bullish to neutral in the near term. A lot depends on whether sentiment keeps deteriorating.”

Stocks had already shown signs of weakening in recent weeks, and Thursday’s decline dragged the S&P 500 to its lowest level since September.

The long-delayed September jobs report showed the U.S. added a solid 119,000 jobs, a sign of ongoing economic strength. Though the unemployment rate edged up to 4.4%, nearly 450,000 people joined the labor force, suggesting job prospects remain relatively stable despite widespread layoffs.

Just hours before the report was published, Verizon announced it would cut 13,000 workers — around 13% of its staff — joining major companies like Amazon, GM, IBM, Microsoft, Target, Paramount and UPS in announcing large-scale layoffs.

Manufacturing lost 6,000 jobs, continuing a decline in a sector the Trump administration has prioritized. Transportation and warehousing shed more than 25,000 jobs. Wage growth slowed, and job figures for July and August were revised downward.

Most of September’s job growth came from health care, hospitality and social assistance.

Meanwhile, Walmart offered another glimpse into consumer behavior when it reported strong quarterly sales and raised its annual forecast. Executives noted that higher-income shoppers are increasingly searching for bargains while lower-income families continue to feel financial strain.

“As budgets tighten, more spending is shifting to essentials rather than discretionary goods,” Chief Financial Officer John David Rainey said on Thursday’s earnings call.

Walmart shares closed up 6.5%.