Market Reassesses AI Returns After Tech Selloff
After Google parent Alphabet and Intel posted disappointing earnings last week, triggering a wave of selling in tech stocks, with the Nasdaq and the Philadelphia Semiconductor Index plunging. Marta Norton, Chief Investment Strategist at Empower, said market unease stems mainly from persistent and even intensifying AI concerns, as investors continue to digest messages from last week's earnings and reassess artificial intelligence investment returns, monetary policy outlook, and the impact of changes in the U.S. political landscape on financial markets.
Midterm Elections to Affect Regulation and Dollar Trend
The U.S. midterm elections will start releasing vote counts from Wednesday morning Taiwan time on November 4, with markets widely expecting Democrats to win control of the House, while control of the Senate remains highly uncertain. The results could affect U.S. fiscal spending, financial regulation and AI-related policies, especially the regulatory environment facing data center construction. Market participants believe that if Democrats win both chambers of Congress, the AI industry, especially data center construction plans, could face stricter regulatory scrutiny.
Francesco Pesole, FX Strategist at ING, noted that a full Democratic victory could be slightly bearish for the dollar, due to rising government shutdown risks, potential deadlock in debt-ceiling negotiations, and further pressure on already fragile AI market sentiment. However, some market participants believe the impact of the elections on equities may be limited, with Mark Malek, Chief Investment Officer at Siebert Financial, saying the elections could trigger market volatility, but other more important macro factors are currently driving stocks.
Nonfarm Payroll Report to Examine Jobs Growth Gap
Apart from the midterm elections, the U.S. October nonfarm payrolls report due this Friday is also a market focus. FactSet data shows markets expect U.S. October nonfarm payrolls to rise by 55,000, up from 29,000 in September, with the unemployment rate expected to hold at 4.2%. Matthew Miskin, Co-Chief Investment Strategist at Manulife John Hancock Investments, said the missing piece in the current strong U.S. economic growth narrative is insufficient jobs growth.
Over 100 Earnings Due, Apple in Focus
Corporate earnings are also a key market focus this week, with more than 130 S&P 500 companies reporting results, including Apple, AMD, Palantir, Qualcomm, Uber and McDonald's. Overall, third-quarter U.S. corporate earnings remain strong, with LSEG data showing that with more than half of S&P 500 companies having reported, overall earnings are expected to grow 31.6% year-on-year.
After large-cap tech stocks suffered successive selloffs, Apple's earnings due Tuesday Taiwan time are especially critical. Apple is up about 28% so far this year, the best performer among the Magnificent 7, with its market capitalization surpassing Nvidia. However, Bank of America removed Apple from its best investment ideas list last Friday, with analyst Wamsi Mohan saying phased iPhone launches and rising component costs could pressure gross margins, while maintaining a Buy rating on Apple.