Wall Street Reverses Sharply Lower After Midterms
With the US midterm elections concluded, Wall Street swung from a one-day sharp rally to a steep decline on the 5th. The Dow Jones Industrial Average rebounded 354 points in early trading, but profit-taking and sector rotation weighed heavily on semiconductor and artificial intelligence stocks, sending the Dow sharply lower intraday by as much as 1,869 points, fully erasing the previous session's gains. The Nasdaq fell as much as 5.73%, down more than 10% from its recent record high and entering correction territory, while the Philadelphia Semiconductor Index plunged over 12%, with all four major indexes tumbling.
At the close, the Dow Jones Industrial Average fell 1,833.06 points, or 3.44%, to close at 51,523.06; the S&P 500 dropped 334.89 points, or 4.36%, to 7,353.73; the Nasdaq slumped 1,421.51 points, or 5.52%, to 24,315.00; and the Philadelphia Semiconductor Index plummeted 1,257.52 points, or 12.25%, to 9,011.14. The US Democratic Party scored a major victory in the midterms, retaking control of both the Senate and the House, with historic flips in several traditionally Republican red states and strongholds. Investors worried the new Congress could tighten regulation on data centers, weighing on semiconductor demand, while markets bet on constrained fiscal expansion and a faster end to the Middle East war, expecting lower energy prices and borrowing costs to benefit a broader range of industries, prompting US funds to rotate from semiconductors and other AI-related stocks into other sectors.
US-Iran Mediation Progress and Oil Price, Inflation Focus
Citing sources, foreign media reported progress in Qatar-led US-Iran diplomatic mediation. Over the past week, Qatar held two rounds of talks in Tehran, Iran, followed by a third round in Doha, engaging with Iranian officials, with US Vice President Vance also actively pushing the negotiations. According to several US and Iranian officials familiar with the talks, Iran had refused to make any concessions for weeks but has recently shown willingness to return to nuclear negotiations and is reviewing a specific proposal on the nuclear issue put forward by mediators. As markets watched the outlook for US-Iran tensions, multiple fresh reports of tanker attacks and damage around the Persian Gulf and Strait of Hormuz raised global energy supply concerns, sending international oil prices sharply higher Thursday, with Brent crude up 3.67 dollars, or 3.88%, at 98.29 dollars a barrel, and NYMEX crude up 2.40 dollars, or 2.72%, at 90.52 dollars.
The US October nonfarm payrolls report is due Friday, with markets expecting a 65,000 increase in October payrolls, sharply above September's 29,000 gain, and the unemployment rate expected to hold steady at 4.2%. Cleveland Federal Reserve President Hammack said Thursday that US inflation has run above target for nearly six years with broad-based price pressures, making a further shift toward a restrictive monetary policy stance necessary, favoring more frequent, smaller rate adjustments to bring inflation back to the 2% target in time while avoiding falling behind economic conditions or excessively shocking markets.
Chip Stocks Rout, TSMC ADR Plunges
On individual stocks, markets worried the new US Congress and local governments could step up scrutiny and restrictions on AI data center construction, electricity and water usage nationwide, fueling concerns over delays to data center expansion. In addition, markets questioned whether Big Tech's massive spending on AI infrastructure can generate matching revenue and cash flow returns in the near term, and amid multiple headwinds chip morale was weak, with Nvidia plunging 9.26% to 181.6 dollars per share. Companies owned by major Republican donor Musk were also hit by the midterm results, with Tesla tumbling 10.77% to 343.69 dollars, and SpaceX dropping 9.05% to 123.62 dollars. Micron's labor dispute and agreement controversy with Taiwan labor groups remained unresolved, leading it to suspend expansion and construction plans for its new Fab11E plant in Taoyuan, with Micron crashing 17.46% to 656.39 dollars per share. Memory stocks collapsed together Thursday, with SanDisk plummeting 22.26% to 806.43 dollars; SK Hynix ADR fell 13.4% to 123.9 dollars.
The Magnificent Seven were all down sharply, with Meta plunging 3.96% to 605.08 dollars; Microsoft falling 3.58% to 535.93 dollars; Amazon down 2.19% to 260.21 dollars; Alphabet slipping 1.94% to 281.74 dollars; and Apple closing 1.53% lower at 344.17 dollars. Among Taiwan ADRs, TSMC ADR sank 10.78% to 353.1 dollars; ASE ADR collapsed 20.77% to 29.72 dollars; UMC ADR tumbled 16.69% to close at 13.38 dollars.