This is kind of tough to say. Best course of action is to start with the basics. Is it in dry media and being kept warm on a heat mat or other source of radiant heat?

Yes and yes. As instructed I gave it a good watering when I first planted it. After it made roots I started watering it about every 2-3 weeks. My plant room where I keep it is also my orchid and fern room and I keep the humidity at about 55-65%.

While I am not sure its related to issue in your picture. I would hold off on watering and let the soil dry out if it does not have leaves. How far down does the damage area go?

Any chance this is mechanical damage from something rubbing on it? Or some sort of burn? Maybe next thing to look for would be insects.

The stick is about 10" long and the damaged part about 2". No insects and no mechanical damage. From my gardening experience to me this looks like an internal rotting because it is soft if you press on it.

Stem rot from the middle is the worst! It happens sometimes when your cutting has too much green growth going into the dormant season. You can cut off the rot part. Hopefully you can still save what's left of the stump.