Strong evidence of a cooling US labor market rippled through Wall Street, spurring a rally in bonds as traders boosted their bets the Federal Reserve will cut rates in December. A slide in megacaps dragged down stocks.

With the scarcity of data caused by the federal shutdown, investors have turned to private readings such as the Challenger, Gray & Christmas Inc. report showing companies announced the most job cuts for any October in over 20 years. Following the numbers, money markets now imply an about 60% chance of a quarter-point rate reduction next month.

Traders are also keeping a close eye on a slate of policymakers slated to speak on Thursday. Fed Bank of Chicago President Austan Goolsbee told CNBC that a lack of inflation data during the shutdown makes him more uneasy about continuing rate cuts.

The US central bank last month lowered rates for a second straight meeting in an effort to bolster the labor market. But inflation, which at 3% in September remained well above the Fed's 2% target, has also raised concerns among some officials that it will take longer to come down than they thought.

The S&P 500 fell to around 6,750. The Nasdaq 100 dropped 1.2%. Nvidia Corp. led losses in megacaps. Qualcomm Inc. became the latest chipmaker to deliver an upbeat forecast and still leave investors underwhelmed.

The yield on 10-year Treasuries slid seven basis points to 4.09%. A dollar gauge fell 0.1%.

Source : Bloomberg