Tech selloff pressures U.S. markets while Fed dissent and a stronger dollar reshape short-term risk appetite and carry implications for global capital flows. Nasdaq fell about 2 percent and the S&P 500 dropped 1.2 percent on Tuesday as warnings from top U.S. bank CEOs and a steep slide in AI favorite Palantir (NYSE:PLTR) weighed on sentiment. In the short run, safe-haven demand for Treasuries and the dollar could temper risk taking. Over the longer run, deepening splits at the Fed and U.S. fiscal stress linked to a record-length government shutdown add uncertainty for rates, growth and corporate earnings across the United States, Europe and Asia. Compared with recent rallies that priced in steady policy easing, today’s moves suggest markets must reprice the odds more quickly.

Market snapshot: Tech-led losses and dollar strength

U.S. equities registered notable losses as technology stocks led the drop. The Nasdaq slid about 2 percent while the S&P 500 fell 1.2 percent. Global equities were weaker too with world stocks down 1.1 percent. Japan underperformed at minus 1.7 percent and Asia ex-Japan lost roughly 1.3 percent. The Philadelphia semiconductor index fell close to 4 percent and Palantir (NYSE:PLTR) tumbled 8 percent. Consumer discretionary names showed pressure and Norwegian Cruise Line (NYSE:NCLH) plunged about 15 percent.

The dollar continued its climb and reached a three-month high above 100 on the dollar index. Sterling hit a seven-month low near $1.30. The stronger dollar is weighing on commodities and risk assets. Bitcoin slipped about 6 percent and dropped below the $100,000 mark while ether slid 11 percent. In fixed income, Treasury yields eased slightly across the curve by 2 to 3 basis points as investors sought safety. Gold gave back 1.5 percent and oil fell close to 0.8 percent. These moves reflect a classic risk-off response that compresses equity valuations and strengthens the dollar in the short term.

Fed divisions deepen the policy debate

The Federal Reserve’s recent meeting produced a rare and striking array of dissents that highlight how divided policymakers have become. The committee’s 10-to-2 decision to cut rates by 25 basis points was historic because it included votes calling for a larger cut and votes calling for no change. Governor Stephen Miran argued for a 50 basis point reduction while Kansas City Fed President Jeffrey Schmid voted against any change. That split shows officials hold sharply different views about where policy should go next.

Federal Reserve Chair Jerome Powell noted that officials have strongly differing views which means markets should stop assuming a clear path to further easing later this year. For traders, the immediate implication is higher volatility around upcoming data and Fed speeches. For longer run positioning, the split raises questions about the central bank’s ability to present a unified narrative. Investors are watching whether the December decision becomes another tight call between a 25 basis point cut or no change at all.

Political and fiscal risks: Shutdown and city politics tighten the backdrop

The U.S. government shutdown entered its 35th day and matched the previous record for duration. Essential programs are being hit. Food assistance for low income households has been halted and many federal workers are not receiving pay. The Congressional Budget Office estimates an eight-week shutdown would trim Q4 annualized real GDP growth by about two percentage points with much of that output loss later recovered. The data drought created by the shutdown leaves the Fed working with weaker signals just as policymakers debate future moves.

Local politics are also in the headlines as New York City approaches a mayoral race that could bring a significant change to municipal fiscal policy. The leading candidate has promised higher taxes on millionaires and corporations. Analysts estimate the proposed income tax increase would affect about one percent of filers while a corporate tax rise would touch roughly 1,000 of the city’s 250,000 businesses. High net worth residents and firms could reassess domicile decisions, which market watchers say could matter for regional financial activity. Online prediction markets place the probability of this candidate’s win at around 95 percent. Together, federal fiscal strain and municipal tax proposals add a layer of political risk that can alter investor appetite for U.S. assets.

What to watch next: data, earnings and central bank voices

Traders should monitor a busy slate of economic releases and corporate reports that could move markets in the next session. Key European and U.K. data include the United Kingdom services PMI for October, Germany industrial orders for September, and euro zone producer price inflation for September. Final euro zone and U.S. PMIs for October will also arrive. In addition, the European Central Bank’s François Villeroy de Galhau and Bundesbank President Joachim Nagel will speak and could influence euro area rate expectations.

From the Americas, Brazil will deliver an interest rate decision. In the United States, ADP private payrolls for October and the ISM services index are due. U.S. corporate earnings headline the calendar with reports from McDonald’s (NYSE:MCD), Qualcomm (NASDAQ:QCOM) and DoorDash (NYSE:DASH) that can shift sector leadership and risk sentiment. In addition, markets will be sensitive to any further comments from Fed officials on the trajectory of inflation and labor market strength.

Volatility may remain elevated given the combination of a strong dollar, tech sector weakness, Fed disagreement and fiscal stress in Washington. However, economic data releases and corporate reports can quickly change the narrative. Traders and portfolio managers will likely focus on near-term risk management while watching whether policy makers converge on a clearer path for rates.

What could move markets tomorrow

• UK services PMI for October
• Germany industrial orders for September
• Euro zone producer price inflation for September and final PMIs
• ECB speakers François Villeroy de Galhau and Joachim Nagel
• Brazil interest rate decision
• US ADP private sector payrolls and ISM services for October
• US corporate earnings including McDonald’s (NYSE:MCD), Qualcomm (NASDAQ:QCOM) and DoorDash (NYSE:DASH)