Market Sell-Off as Fed Rate Cut Expectations Collapse and Tech Valuations Under Pressure

This analysis is based on the Wall Street Journal report [1] published on November 14, 2025, which highlighted that U.S. futures and global markets fell as Federal Reserve interest-rate cut hopes were dashed, with high technology valuations adding pressure to market sentiment.

The market sell-off on November 13, 2025, was triggered by a dramatic shift in Federal Reserve monetary policy expectations. According to market data [0], major indices experienced significant declines: S&P 500 closed at 6,737.49 (-1.3%), NASDAQ Composite at 22,870.36 (-1.69%), Dow Jones at 47,457.22 (-1.49%), and Russell 2000 at 2,382.98 (-2.4%). The technology sector was particularly affected, with the Invesco QQQ Trust declining 2.04% to $608.40 [0].

The primary catalyst was the collapse in December rate cut probabilities, which fell from 95% a month ago to approximately 47-52% according to multiple sources [2][3][4]. The CME FedWatch Tool now shows roughly a coin toss probability for a 25-basis point cut at the December 10-11 meeting [3][4]. This shift was driven by hawkish commentary from Fed officials, including statements about being “hesitant on further easing” [4].

: Technology stocks face heightened risk due to elevated valuations. The QQQ Trust trades at a P/E ratio of 34.31x, while major tech giants Microsoft and Apple trade at 35.80x and 36.54x respectively [0]. These multiples make growth stocks particularly sensitive to interest rate expectations, as higher rates increase discount rates in valuation models.

: The sell-off extended beyond large-cap tech to include small-cap stocks, with the Russell 2000 underperforming major indices with a 2.4% decline [0]. This suggests broader economic concerns rather than isolated tech sector issues.

: Defensive sectors outperformed significantly, with Consumer Defensive gaining 0.87%, while cyclical sectors suffered substantial losses: Utilities (-3.11%), Consumer Cyclical (-2.87%), and Real Estate (-2.37%) [0]. This indicates a risk-off sentiment shift among investors.

: Trading volumes were elevated across key instruments, with QQQ volume at 69.82M shares versus 54.63M average, suggesting strong conviction behind the sell-off [0].

The December 10-11 FOMC meeting represents a significant volatility risk regardless of outcome. Economic data releases, particularly inflation and employment figures, could further shift rate expectations. Key technical support levels on major indices are being tested, which could trigger additional selling if breached [0].

Prolonged higher rates could trigger broader valuation compression, especially in technology stocks. If the Fed maintains restrictive policy longer than expected, economic growth could be impacted, potentially leading to sustained sector rotation from growth to value stocks.

• CME FedWatch Tool
  : Daily tracking of rate cut probabilities [3][4]
• 10-Year Treasury Yield
  : Movement above 4.5% would increase pressure on equities
• VIX Index
  : Elevated volatility would indicate continued market uncertainty
• Technology Sector Relative Strength
  : Ongoing underperformance would confirm valuation concerns

The market reaction reflects a fundamental reassessment of monetary policy outlook, with the rapid shift from near-certainty of a December rate cut to coin-toss probability suggesting markets are pricing in a more hawkish Fed stance [1][2][3][4]. The technology sector’s vulnerability is particularly pronounced given its elevated valuation multiples [0]. Defensive positioning is evident across sector performance, with investors rotating away from rate-sensitive growth stocks toward more stable consumer defensive names [0].

The elevated trading volumes and broad-based nature of the sell-off, including significant small-cap underperformance, indicate this represents more than just a technical correction but rather a meaningful shift in market sentiment regarding the interest rate environment [0]. Decision-makers should closely monitor Fed communications and economic data releases while being prepared for continued volatility through the December FOMC meeting period.