Tech reckoning

It remains to be seen what effect last week’s midterm elections will have on US politics. In the markets, the impact was dramatic—at least for a day.

An election surprise and existing concerns about the health of the AI trade converged last week, as the stock market’s initial rally after the “blue wave” midterm sweep gave way to a tech-led rout on Thursday amid speculation that a Democrat-led Congress might slow the AI data center buildout. The Nasdaq Composite (COMP) lost 5.5%, the Nasdaq 100 (NDX) tech index slid 6.4%, and the S&P 500 (SPX) fell 4.4%—the biggest one-day declines for the SPX and COMP since April 2025, and the largest for the NDX since March 2020.

The SPX fell to its lowest level since late July and ended the day 6% below its October record close. And although the market started Friday with a strong rally, the move lost momentum as the day wore on:

The headline: Data center uncertainty fuels market volatility.

The fine print: Last week’s bearishness was relatively concentrated. Six of 11 SPX sectors were negative for the week, but only three fell more than 1%. Selling was heaviest in the semiconductor and electronic equipment industries in the tech sector, along the construction & engineering and electrical equipment segments in the industrials sector—areas that fell even during Wednesday’s rally. Also, while Meta posted a small loss last week, three other major AI hyperscalers—Alphabet, Amazon, and Microsoft—gained ground.

The numbers: 165,000—the payrolls increase from Friday’s monthly jobs report (more than twice the consensus estimate). 189,000—the number of weekly jobless claims reported last Thursday, matching the lowest total (from July) since 1969. The numbers highlighted continued labor market strength and, following the previous week’s strong GDP reading, underscored the still-robust US economic backdrop.

The scorecard: The NDX (and the COMP) fell into correction territory on Thursday (10% or more below a previous high). The Dow Jones Industrial Average (DJIA) declined only modestly for the week:

S&P 500 sector returns: The strongest S&P 500 sectors last week were consumer discretionary (+2.7%), communication services (+2.3%), and real estate (+1.9%). The weakest sectors were energy (-11.9%), tech (-6.9%), and industrials (-2.8%).

S&P 500 stock moves: Last week’s biggest gains were Applovin (APP) +71% to $391.22, Fiserv (FISV) +26% to $62.88, and Idexx Laboratories (IDXX) +23% to $676.04. The biggest losses were Lumentum (LITE) -36% to $538.59, Seagate (STX) -28% to $460.99, and Marvell (MRVL) -28% to $141.2. Other moves: Bright Minds Biosciences (DRUG) -51% to $26.20 on Monday (and -18% to $21.55 on Tuesday), Veracyte (VCYT) -54% to $24 on Wednesday.

Yields and the dollar: The 10-year US Treasury yield fell 0.05% to 4.86% last week, thanks to another “flight-to-safety” episode last Thursday. The US dollar index (DXY) climbed 0.42 to 102.30.

Commodity futures: Dec. WTI crude oil (CLZ6) fell $12.98 to $91.14 last week, the market’s biggest weekly decline since 2020. Dec. gold (GCZ6) rallied $176 to $ 4,074.90. Biggest gains: Jan. platinum (PLF7) +7%, Jan. orange juice (OJF7) +5.5%. Biggest declines: Jan. Brent crude oil (BF7) -13.3%, Dec. WTI crude oil (CLZ6) -12.8%.

Crypto: Bitcoin -1.9% to $75,746.93 last week, Ether -0.3% to $2,235.05, Solana -6.4% to $90.06.

Coming this week

Inflation data highlights an otherwise light economic calendar. Traders and investors will also likely be watching for any signals from Democratic leadership regarding the data center question:

●Monday: Wholesale Inventories, New York Fed Consumer Inflation Expectations
●Tuesday: NFIB Business Optimism Index, Consumer Price Index (CPI)
●Thursday: Existing Home Sales
●Friday: Producer Price Index (PPI)

This week’s earnings represent a grab bag of industries, including AI-related names:

●Monday: AST SpaceMobile (ASTS), Barrick Mining (B), Dillard's (DDS), Hims & Hers (HIMS), Monday.com (MNDY), Occidental Petroleum (OXY), Rocket Lab (RKLB), Tower Semiconductor (TSEM)
●Tuesday: CoreWeave (CRWV), Cisco (CSCO)
●Wednesday: Kodiak Sciences (KOD)
●Thursday: Applied Materials (AMAT), Cerebras (CBRS), Inhibrx Biosciences (INBX), Yeti (YETI)
●Friday: Suncrete (RMIX), Starz Entertainment (STRZ)

Test prep?

Last week’s volatility jibed with Morgan Stanley & Co. strategists’ anticipation of possible “clearing events” that might challenge the stock market in the near term. While the data center question still needs to play out, they also noted that midterms have typically been followed by “very strong six- to 12-month returns,” despite sometimes presenting shorter-term volatility headwinds.¹

Meanwhile, Morgan Stanley Wealth Management strategists reiterated their belief in the AI bull market, arguing that the election results inserted a “necessary pause in the existential race” for AI capacity that actually reduces the risk of a boom-bust scenario and “increases the odds of a ‘Goldilocks’ scenario in 2027-2028.”² The sell-off, they noted, was more about positioning and deleveraging, not an exit of “real money” from the market.

Looking solely at last Thursday’s price action, the SPX fell more than 4% while closing at its lowest level in 70 trading days—something it’s done only 28 other times since 1957. The index’s median returns five, 10, 15, and 20 trading days later were 1.3%, 1%, 2.3%, and 2.5%, respectively. (For perspective, the biggest individual gain after 20 days was 22.5% and the biggest individual loss was  -23.3%.)

The fact that the 10-day return was smaller than the five-day return shows the index often pulled back after an initial bounce off the sell-off low. The median net return from day five to day 10 was, in fact, negative, and the SPX posted a net decline in this period in 16 of 28 cases.³

That’s simply the numbers’ way of saying that, even when the market climbs relatively soon after a sell-off like last week’s, the road higher can be bumpy. Volatility spikes, like earthquakes, often have aftershocks, and even in the most bullish circumstances it’s not unusual for the market to test a sell-off low.

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¹ MorganStanley.com. Weekly Warm-up: Clearing Events Still Ahead. 10/26/26.
² Morgan Stanley. Market Update from Lisa Shalett, Chief Investment Officer of Morgan Stanley Wealth Management: The Pause that Refreshes. 11/6/26.
³ All figures reflect S&P 500 (SPX) daily prices, 1957-2026. Supporting document available upon request.