Call it some air slipping out what might be an AI bubble, or the Fed engineering a tightening in liquidity into a growing economic slowdown, or some combination of the two, but markets are pulling back again on Thursday.

Just before the noon hour on the east coast, the Nasdaq is lower by 2% and the S&P 500 down 1.2%.

Crypto ( CRCW ) prices — in the unfortunate position these past weeks of being uncorrelated with stocks when they were rising every single day, but perfectly correlated when stocks sell off — are again taking it on the chin. Bitcoin is lower by 3% over the past 24 hours and threatening to tumble back below $100,000. Ether (ETH), XRP (XRP), solana (SOL) and doge (DOGE) are lower by 2%-6%.

Crypto ( CRCW )-related stocks are having an even harder time of it. Robinhood (HOOD) is down 8.5% one day after reporting a sizable earnings beat, in part due to surging crypto trading. Among other exchanges, Coinbase (COIN) is lower by 5.6% and Gemini (GEMI) by 3%. Bullish (BLSH) is down 8% and Galaxy Digital ( GLXY ) by 5.1%.

Capital continues to flee to digital asset treasury sector, led by a 5.9% decline in pioneer Strategy (MSTR). At $238, MSTR is now lower by 6.8% year-over-year and down by 56% since soaring to $543 in the days following President Trump's 2024 election victory.

Bitcoin mining stocks — many of which have soared this year thanks to a pivot to becoming AI infrastructure providers — aren't being spared. Hut 8 ( HUT ) , IREN (IREN), and Cipher Mining ( CIFR ) are among those down more than 8%.

Getting hawkish at the wrong time?

Powell's sentiments have since been echoed by numerous other Fed members. Worried about flying blind as the government shutdown means no official economic statistics, the central bank might be missing or choosing to ignore what's now become a string of other data pointing to underlying weakness.

The latest came Thursday with one of the worst Challenger job layoff reports in more than two decades, along with a troubling outlook from used-car sales bellwether CarMax ( KMX ) . That company's CEO also unexpectedly stepped down — shares are lower by 20%. One day ago, McDonald's warned on the economic pressure being felt by its customers, sentiments echoed previously by chains like Chipotle and Cava ( CAVA ).

The continued federal government shutdown also looks to be extending far further than most previously expected, according to the latest Polymarket odds. Folks can carp about deficits and bloated government all they want, but the shutdown means many billions of dollars that would otherwise by flowing through the economy (and markets) are not doing so.