The US stock market is facing turbulence as investors brace for key economic data and tech earnings reports. The recent midterm elections, which saw Democrats gain control of Congress, have sparked concerns about the future of AI data-center expansion. This uncertainty has led to a sharp sell-off in tech stocks, with the Nasdaq tumbling over 12% in a single day, marking its biggest drop in more than six years. The S&P 500 also dipped nearly 12% below its October high, confirming a market correction.
Volatility has spiked since the election results, with tech stocks leading a modest rebound on Friday but major indexes still posting weekly losses. The market's focus will shift to the upcoming consumer price index (CPI) report and earnings from major tech companies like Nvidia and Microsoft. Investors are also watching for clues on the Federal Reserve's rate-hike path, with a roughly 80% chance of a December rate increase following a strong jobs report.
Analysts warn of a fragile market momentum, citing regulatory and political uncertainties. Marvin Loh, senior global macro strategist at State Street, noted the regulatory overhang that could impact the AI trade. Meanwhile, Garrett Melson of Natixis Investment Managers Solutions highlighted the cross-currents investors are grappling with post-election. The CPI report will be crucial in determining the Fed's next moves, with about two more rate hikes expected into 2027.
Tech stocks have underperformed the S&P 500 by the largest margin since May 2002, signaling a buyers' strike in the sector. Reports from companies like CoreWeave, central to AI buildout concerns, could provide some relief if they offer cautiously optimistic outlooks. The market's shaky ground underscores the need for clear economic signals to stabilize investor sentiment.