Nasdaq QQQ Slips Into Correction as Fed Hike Odds Hit 73%

Nasdaq 100 funds such as QQQ fall into correction as markets price a 73% chance of a December Fed rate hike with the 10-year Treasury yield near 4.9%.

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The Nasdaq 100 entered correction territory on Monday, Nov. 2, closing near 27,990. That is 10% below its Oct. 6 record. The slide was the index's worst month since March 2025. It came as markets priced about a 73% chance that the Federal Reserve raises rates in December and the 10-year Treasury yield held near 4.9%.

The index is still up about 11% for the year. The drawdown is its third technical correction of 2026. Exchange-traded products tracking the benchmark, led by Invesco QQQ Trust (QQQ), fell with it.

What Happened to the Nasdaq 100?

The Nasdaq 100 fell into correction after a Monday bounce in technology shares faded and sellers returned late in the session. Disappointing earnings from several large technology companies added to the pressure. So did expectations that Democrats would do well in Tuesday's midterm elections.

The breadth of the decline was wide. Roughly half of the index's constituents are now in a bear market, down 20% or more from their recent highs. The headline index is therefore holding up better than its average member.

Not all of the market fell. Seven of the 11 S&P 500 sectors gained on Monday as investors moved out of semiconductors and into cyclicals and banks. The pattern points to rotation within equities rather than broad liquidation. Nvidia (NVDA) briefly overtook Apple (AAPL) in market value during the turmoil, a reminder of how closely the largest index weights are bunched.

Why Are Markets Pricing a December Fed Rate Hike?

Markets price a December hike because the fed rate path has turned from easing toward tightening. Futures show about a 72% to 73% probability of a quarter-point increase at the December meeting. Odds were little changed from the prior Friday. Traders also price about 58 basis points of cumulative hikes through December 2027.

That repricing lifts the cost of capital across the economy. Interest rates that stay higher for longer reduce the present value of distant earnings, which is the main reason long-duration growth stocks are most exposed. The Nasdaq 100 is dominated by such companies, including those with heavy artificial intelligence spending plans. Higher borrowing costs also raise the return those investments must clear.

How Do Treasury Yields Fit In?

The 10-year Treasury yield is near 4.9%, and it matters because it sets the discount rate that equity investors apply to future profits. The yield slipped about 2.3 basis points to 4.912% in the latest session, its lowest close since Sept. 9. That is a modest retreat from recent highs, and it has not been enough to relieve pressure on valuations.

A yield near 5% gives investors a competitive risk-free return. Equities must offer more growth to justify the same prices, and the equity risk premium over Treasuries narrows. Each leg higher in yields has coincided with weakness in the most richly valued technology names.

The same dynamic cuts across asset classes. Gold has struggled to extend its recovery as December hike risk supports the dollar and real yields.

Why Did Technology Stocks React This Way?

Technology stocks reacted sharply because three pressures arrived together: rate risk, earnings disappointments and political uncertainty. Each by itself might have been absorbed. Together they pushed the Nasdaq 100 through the 10% threshold that defines a correction.

The earnings misses were important because expectations were high after a year of heavy AI investment. Investors have grown more sensitive to whether spending on data centers and chips translates into revenue. The prospect of a divided or Democratic-leaning Congress added questions about tax and regulatory policy for large platform companies.

The sell-off has also drawn dip-buying interest. Some strategists argue that investors are waiting for the midterm outcome before adding exposure, which would make the Nov. 3 vote a short-term catalyst in either direction.

What Does This Mean for Broader Markets?

The impact is uneven. The S&P 500 has held up better than the Nasdaq 100 because of its greater weighting in financials, energy and industrials. Those sectors tend to be less sensitive to discount-rate changes, and banks can benefit from a steeper path for short-term rates. Funds such as SPY therefore show smaller declines than technology-heavy products.

The rotation has limits. If yields rise further, higher borrowing costs would eventually weigh on cyclical earnings as well. A hike in December would also be the first increase after a long stretch in which the policy debate centered on cuts.

What Comes Next for the Fed and Tech?

Near-term direction depends on incoming inflation and labor data, which will shape whether the December hike odds rise or fade. A softer reading would lower the probability and could ease pressure on yields. A hotter one would raise the odds and test the 4.9% area on the 10-year, a level that has marked a ceiling for equity valuations in recent weeks.

Corporate results will matter as much. Guidance on AI capital spending from the largest chip and cloud companies will indicate whether the earnings disappointments were isolated or a trend. A move below the correction threshold into a deeper decline would put a 20% drawdown from the October record, or roughly 24,800 on the index, in view.

Outlook

The Nasdaq 100's 10% decline from its October record reflects a market adjusting to a Fed that is more likely to raise rates than cut them. With about a 73% chance of a December hike priced in and the 10-year yield near 4.9%, valuations in growth-heavy sectors face a higher hurdle. The next inflation and jobs data, and the midterm outcome, are the nearest events that can shift that balance.