The Post-Election Rally Lasted One Day, and the Nasdaq Closed in a Correction

The post-election rally lasted one day, and the Nasdaq closed in a correction

The rally that followed Tuesday's midterm elections lasted one session. On Thursday the Nasdaq Composite fell 5.52%, or 1,421.51 points, to 24,315.00. That left it 11.90% below its October 6 record close of 27,599.79 and past the 10% line, at 24,839.81, that marks a correction. It was the index's first close beyond that line since the record, and its lowest close since April 21.

It was also the Nasdaq's worst percent day since April 4, 2025, when it fell 5.82%. During the afternoon the index dropped below its 200-day moving average for the first time since April.

The narrower Nasdaq-100, which holds the biggest technology companies, did worse. It fell 6.36% to 26,629.81, its worst day since March 16, 2020. That index had already crossed the correction line on Monday and is now 14.71% below its own October 6 record.

Wednesday's gain is gone

All three major indexes gave back more than Wednesday's gain and ended below Tuesday's close:

• Nasdaq Composite: up 364.50 points Wednesday, down 1,421.51 Thursday
• S&P 500: up 119.70 Wednesday, down 334.89 Thursday
• Dow Jones Industrial Average: up 1,569.40 Wednesday, down 1,833.06 Thursday

Chris Larkin, a managing director of trading and investing for E*TRADE from Morgan Stanley, said in an email quoted by CBS News:

"Even though the market rallied Wednesday after the midterm elections, there were visible cracks in the AI ecosystem, and they widened on Thursday amid investor concerns about a potentially slower data center buildout with Democrats in charge of Congress."

The stories below take up those concerns, the earnings and the selling pressure one at a time. For perspective, the Nasdaq is still up 4.62% for 2026.

What it could mean

A close in correction territory, below the 200-day average, may draw more selling from funds that follow trends, and it could mark the start of a longer period of swings. Sharp declines after long advances have also often been followed by strong rebounds.

Is this the start of a deeper decline in technology stocks, or a fast reset inside a longer advance?

The close: the S&P 500 fell 4.36% to its lowest close since July, and the fear gauge jumped about 70%

All three major indexes had their worst percent day since April 2025.

• S&P 500: 7,353.73, down 334.89 points (-4.36%). Lowest close since July 29; 5.95% below its record
• Nasdaq Composite: 24,315.00, down 1,421.51 (-5.52%). 11.90% below its record
• Dow Jones Industrial Average: 51,523.06, down 1,833.06 (-3.44%). Lowest close since October 8; 5.20% below its record
• Russell 2000: 2,729.89, down 127.06 (-4.45%). Back more than 10% below its August record
• VIX (the fear gauge): 28.18, up 11.57 (+69.66%). Highest close since March 30

The S&P 500 and the Dow are not in a correction. In points, this was the largest one-day drop ever for the S&P 500 and the Nasdaq, though higher index levels make point records easier to set. The S&P 500's fall was its worst for the second session after a midterm election since at least 1962; the next worst was 2.29%, in 2002.

The shape of the day

It was a one-way slide. The S&P 500 and the Nasdaq never traded above Wednesday's close, and the S&P 500 finished within 0.05% of its low. The Dow opened higher and was up as much as 354 points, so it fell about 2,188 points from its high to the close. By a rough estimate from closing prices, S&P 500 companies lost about $3 trillion in market value.

Rates, gold, oil, bitcoin

• 10-year Treasury yield: fell to about 4.84%
• 30-year Treasury yield: about 5.25%
• Gold: about $4,100 an ounce, up 0.63% on the day and about 5.1% this week
• Brent crude: up about 4%, to more than $98 a barrel
• WTI crude: up about 3%, to above $90
• Bitcoin: about $76,000, down more than 5% and back below $80,000
• Dollar index: 101.59, up 0.08%

What it could mean

A jump in the VIX of this size has often come near short-term lows, because fear tends to peak as selling runs its course. It can also mark the start of a period of larger daily swings, and the S&P 500 closed almost at its low. Lower yields and higher gold could mean investors want safety, or could offer some support for stocks if yields keep falling.

Did Thursday's spike in fear mark a low for this selloff, or the beginning of a rougher market?

The chip index fell 12.25%, its worst day since March 2020, and Korea's Kospi lost 5%

The PHLX Semiconductor index fell 12.25% to 9,011.14, its worst day since March 16, 2020, when it lost 15.90%. It was the index's lowest close since April 10. It is down 15.7% this week and about 32% below its October high, though it is still up about 27% for 2026.

Each of the big names has its own history:

• Nvidia -9.26%, to $181.60: its worst day since January 27, 2025, and its lowest close since April 7. Nvidia is now 24.09% below its October 6 record close and down 2.63% for 2026. By a rough estimate from closing prices, it lost more than $400 billion in market value.
• AMD -17.26%, to $404.40: its worst day since February 4, 2026, when it fell 17.31%. It is 37.73% below its October 6 record and still up about 89% for 2026.
• Micron -17.46%, to $656.39: its worst day since March 16, 2020. It is 45.91% below its June 25 record and still up about 130% for 2026.
• Sandisk -22.26%: the S&P 500's worst stock, and the worst day in a trading history that begins in February 2025. It is still up about 240% for 2026.
• Broadcom -10.43%: its worst day since June 4 and its lowest close since August 2025.

Others in the group: Astera Labs -19.62%, Lumentum -18.68%, MACOM -18.35%, Western Digital -17.35%, Marvell -16.43%, Lam Research -16.36%, Seagate -16.25%, Applied Materials -13.58% and Intel -10.33%.

Companies that rent out AI computing, known as neoclouds, also fell: Iren -16.95%, Nebius -14.95% and CoreWeave -9.83%. Other large technology companies fell far less: Meta -3.96%, Microsoft -3.58%, Alphabet -2.20%, Amazon -2.19% and Apple -1.53%.

Asia went first

South Korea's Kospi closed down 5.28% at 5,383.8, before the U.S. market opened. SK Hynix closed down 9.46%, and Japan's Advantest down 14.71%. Japan's Nikkei 225 lost 1.79%. It was not one-way across Asia: Hong Kong's Hang Seng Tech index was up more than 5% during its session.

What it could mean

Chip stocks still show large gains for 2026, so there may be more profit to take if doubts about AI spending grow, and other stocks tied to the buildout, such as power and equipment makers, could follow. On the other side, a drop this large in a group with growing sales has at times drawn buyers quickly, and rebounds in chip stocks have often been as sharp as the falls.

Are chip stocks repricing a real slowdown in AI spending, or only the fear of one?

Investors fear the Democratic sweep could slow the AI data center buildout, though no moratorium has passed

Democrats won both chambers of Congress and key governorships on Tuesday. On Thursday investors moved further away from technology stocks on fears of a slowdown in data center construction. Numerous Democrats who won races have pledged to slow or halt the construction of AI data centers, and Texas, Ohio, Michigan and Georgia are of particular concern.

Why Texas matters most

Democrat Gina Hinojosa won the Texas governor's race, and James Talarico won the state's Senate seat. Wells Fargo estimates that 27% of planned U.S. data center gigawatts are in Texas. TechCrunch reports that Hinojosa supports a statewide moratorium. Richard Clode, a portfolio manager at Janus Henderson, read Hinojosa's position on CNBC differently, as building data centers the right way under the right legal framework, not never building them.

Democrats also won the governor's races in Ohio and Georgia. TechCrunch reports that Morgan Stanley flagged Ohio Gov.-elect Amy Acton as a risk.

The calls for a pause

Sen. Bernie Sanders of Vermont, who caucuses with Democrats, has called for a national data center moratorium. In a post on X on Wednesday evening, Sanders wrote: "Americans don't want Big Tech oligarchs wrecking the environment, gutting jobs and threatening humanity's future." Rep. Yassamin Ansari of Arizona called for a pause on advanced AI development.

These are calls and pledges, not law. A bill from Sanders and Ocasio-Cortez could face a veto, Republicans still hold the White House, and Hinojosa takes office in January.

What voters said

An NBC News exit poll, as cited by TechCrunch, found that nearly 80% opposed data centers in their neighborhoods and almost 60% called them a crucial or major factor in their vote. CNBC reported that voters sided against data centers on 40 of 41 local ballot measures in 10 states, citing an analysis by Ballotpedia and its own count.

The reaction

Goldman Sachs traders wrote that "building will become more expensive, complicated and slower." Meta President Dina Powell McCormick told a Wall Street Journal conference on Wednesday night that building data centers will be harder after the elections. OpenAI on Thursday reaffirmed its promise to pay the full cost of powering data centers.

What it could mean

A slower buildout could weigh on chip, power and data center stocks, which depend on continued construction. It could also make existing capacity more valuable, which may favor the largest companies that already have it over debt-funded newcomers. And if the pledges soften once the winners take office, the fear itself could fade.

Will these pledges turn into real limits on building, or soften once the new officials are in office?

Qualcomm and Arm beat estimates, and their stocks still fell 9.49% and 13.08%

Two chip companies reported on Wednesday evening, and investors generally viewed both sets of results as mixed.

Qualcomm beat estimates slightly but forecast earnings of $2.15 to $2.35 a share for the current quarter, against an estimate of $2.27. Handset chip sales fell 26%. The stock fell 9.49% to $156.75. Data center revenue reached $650 million for the quarter, still a small part of the company.

CEO Cristiano Amon told CNBC in an interview:

"We don't have a demand issue; it's a supply issue."

Amon added: "If I had more supply, I would probably be doing better." The global memory shortage has raised prices and made key supplies harder to get for Qualcomm, Intel and AMD.

Arm reported adjusted earnings of 52 cents a share, against an estimate of 47 cents, with strong licensing and weak royalties. The stock dipped almost 2% after the bell Wednesday and closed Thursday down 13.08% at $166.72, its worst day since July 31, 2025.

Bank of America's Vivek Arya stayed positive on Arm, writing that "Licensing is a leading indicator of future Royalties (12-24 months)." Arya also cautioned that "Arm's increasing dependence on SoftBank for Licensing revenue could pose circular financing concerns."

Chip stocks were already sliding for a second day, so these falls cannot be separated cleanly from the broader selling.

What it could mean

If supply, not demand, is what is holding chipmakers back, as Amon says, results could improve as shortages ease, and these drops could look overdone. But when beats are met with declines this large, it may mean expectations were set very high, and other AI suppliers could face the same bar. Any spread of concern about circular financing could reach well past Arm.

Are investors punishing the numbers themselves, or simply selling anything tied to AI?

Strategists pointed to forced selling, and everyday investors were on track for their biggest net selling since 2020

Some strategists argue that part of Thursday's fall had more to do with positioning than with the election. Charlie McElligott, cross-asset strategist at Nomura, wrote on Thursday:

"They're shooting the generals."

McElligott added: "Single-name stock moves are absolutely BONKERS," and "The Momentum/High Sharpe unwind has been so substantial that we are approaching the dreaded 'Round Trip' levels in some trades." Yahoo Finance reported that McElligott sees the main catalyst not as a sudden deterioration in fundamentals but as hedge funds rushing to lock in profits before the end of the year.

By Thursday's close, AMD was down about 36% and Nvidia about 24% from a month earlier.

Richard Clode of Janus Henderson told CNBC that about 40% of long-short funds were already down for the year before Thursday, and described heavy pressure and forced selling. Viraj Patel, global macro strategist at Vanda Research, described a "buyers' strike" among institutional investors alongside forced selling by systematic and leveraged strategies.

Everyday investors

Vanda's figures, reported by Yahoo Finance, show everyday investors sold a net $358 million in individual U.S. stocks as of 2:58 p.m. ET. That put them on track for their biggest single-day net selling since March 17, 2020, when they pulled $502 million. This was about an hour before the close, so it is not a final count.

Patel, in emailed comments:

"This is what we would call a total capitulation by retail investors."

Vanda found "no signs of buying the dip" in individual stocks, though some investors kept buying leveraged funds such as TQQQ and SOXL. A day earlier, Stocktwits readings had shown retail traders still bullish on the chips that were falling.

What it could mean

Very low sentiment and capitulation by everyday investors have often come before rebounds, and selling forced by positioning can end quickly once it is done. But forced selling can also feed on itself as losses trigger more of it, and purchases of leveraged funds suggest not everyone has given up yet.

Was Thursday the washout that clears the way for a rebound, or did the forced selling only begin?

Is the AI trade over? Peter Boockvar says yes for the stocks, not the technology; Larry Adam would slowly move back into tech

Asked on CNBC whether Thursday signaled the end of the AI trade, Peter Boockvar, chief investment officer at OnePoint BFG Wealth Partners, answered:

"I think it is, but we need to separate the AI trade from the further development of the technology."

Boockvar's point is about the stocks. Investors, Boockvar said, are questioning a forecast $1.2 trillion of capital spending next year. Boockvar went on: "The technology is still going to continue on in terms of its development, but if there is a slowdown in the actual development and the buildings and the infrastructure and so forth, that's what stocks are going to trade off."

The other camp

Larry Adam, chief investment officer at Raymond James, said on CNBC: "I don't think that it's over when it comes to AI." Adam said building already under way will continue for at least the next year, and that some of these stocks trade at about a 30% discount to their history while earnings estimates keep rising. Adam's conclusion:

"I actually would use this as an opportunity to slowly transition back into tech."

Others on each side

Worried:

• Macro Research Board, in a Thursday note: "The shakeout in A.I.-related stocks has much further to run."
• Kevin Mahn, chief investment officer at Hennion & Walsh, told Yahoo Finance: "there's going to be more choppiness ahead."

Less worried:

• Ed Yardeni, president of Yardeni Research, quoted by NBC News: "I don't think this is an AI bubble bursting." And: "I think it's an AI bubble losing some air very, very rapidly."
• Rob Sechan, founder of Newedge Capital Group, quoted by CNBC: "Nobody voted to make compute less scarce."

AMD's CEO, before the bell

Lisa Su spoke to Yahoo Finance's Brian Sozzi in an interview published at 8:26 a.m. ET, before Thursday's open, so Su was not reacting to the drop. Asked whether the market is right to question the growth of AI, Su said: "I think the market can sometimes be a little bit short-sighted." AMD had reported on Tuesday evening: revenue up 45% to a record $13.38 billion, against about $13.06 billion expected, and data center revenue up 97% to a record $8.5 billion. The stock then closed Thursday down 17.26%.

What it could mean

If next year's spending forecasts hold, lower prices could meet rising earnings, and the group could recover. If those forecasts are cut, suppliers' order books could slow, and stocks valued on rapid growth may have further to fall even as the technology keeps advancing. Both can be true for a time: the technology can keep improving while the stocks do not.

Is this a breakdown in the AI trade, or a bounce waiting to happen?

Only 73 S&P 500 stocks rose as all 11 sector funds fell, and the biggest companies did the most damage

This selloff was broad. In the S&P 500, 430 stocks fell and 73 rose, about six of every seven lower. The counts come from each stock's closing price and may shift by a few.

But the index's 4.36% fall overstates what the typical stock did. The median S&P 500 stock fell 2.28%, and the equal-weight average fell 3.12%. The biggest companies did the most damage.

All 11 sector funds fell

• Technology (XLK): -8.00%, its worst day since March 16, 2020
• Industrials: -4.13%
• Consumer discretionary: -3.83%
• Energy: -2.98%, even with oil higher
• Materials: -2.91%
• Financials: -2.87%
• Health care: -2.50%
• Real estate: -1.82%
• Consumer staples: -0.75%
• Utilities: -0.71%
• Communication services: -0.59%

The selling spread during the day. Keith Lerner, chief investment officer at Truist Wealth, quoted by CNBC: "Unlike yesterday, you're just seeing that the sell-off in tech, the size of it, is now feeding itself into the broader market." Lerner added: "The rubber band is becoming increasingly stretched."

Inside the Dow

All 30 Dow stocks fell, some only barely: Coca-Cola lost 0.07% and Procter & Gamble 0.13%. By arithmetic from closing prices, Goldman Sachs (-6.36%) took about 351 points off the Dow and Caterpillar (-6.37%) about 224, together about 31% of the drop.

What it could mean

When nearly everything falls together, the selling may have more to do with positioning than with views on each company, and days like this have often come near short-term lows. But if weakness keeps spreading from technology to banks and industrials, it could point to worry about the economy itself. A median stock down far less than the index also leaves room for either reading: most stocks held up better, or most have further to catch down.

Is the broader market a cushion for technology stocks, or the next place the selling goes?

Tesla fell 10.77% and SpaceX 9.05% on worries about their merger prospects and the AI buildout in Texas

Tesla closed down 10.77% at $343.69, its worst day since July 23. SpaceX closed down 9.05% at $123.62. It was a third straight daily loss for Tesla and a second for SpaceX.

The reporting ties the moves to the election. Democrats won control of the House and Senate, and Texas, where both companies have their headquarters, elected a Democratic governor and sent James Talarico to the Senate. That raised concerns about regulatory hurdles for data center buildouts and about a possible merger between the two companies.

Dan Ives, partner and managing director at Yorkville, wrote on Thursday:

"We will believe a SpaceX/Tesla merger happens but now faces a much tougher regulatory roadmap to get this deal done in 2027 given this new political blue roadmap in DC/Texas."

CNBC put Elon Musk's midterm spending at roughly $474 million, a bet that failed.

Tesla was the worst of the Magnificent Seven, all of which fell on Thursday.

What it could mean

A longer road to a merger could take some of the deal premium out of both stocks, and closer scrutiny in Washington and Texas could weigh on them for some time. On the other hand, a deal that takes longer is not a dead one, Ives still expects it to happen, and stocks that fell on political concerns could recover if policy proves less severe than feared.

Do these drops reflect lasting political risk for the Musk companies, or just a delay to a deal?

AppLovin rose 31.04%, the S&P 500's best, while Tripadvisor, Fastly and Dutch Bros fell more than 20%

AppLovin +31.04%, to $356.10. Third-quarter revenue of $2.18 billion topped the $2.07 billion estimate, and earnings of $4.30 a share beat the $4.04 estimate. The company forecast fourth-quarter revenue of $2.37 billion to $2.40 billion, against the $2.25 billion analysts expected, and announced a buyback of up to $3.2 billion. It was the stock's best day since November 7, 2024, yet it is still down about 47% for 2026.

Tripadvisor -27.65%. The CEO and CFO are leaving, and the company gave a weak forecast.

Fastly -26.88%. The company beat estimates, but its president of Go To Market will retire in 2027.

Dutch Bros -21.41%. The company cut its guidance.

Expedia -13.74%. Expedia beat third-quarter estimates but gave mostly weaker-than-expected guidance for the current quarter.

Also moving

• EPAM +20.63%
• Unity +14.93%
• Tapestry +7.07%
• Verisk +6.88%
• Corpay +6.78%
• CF Industries +6.17%
• Charter +4.67%
• Motorola Solutions +4.03%
• Figma -16.67%
• Snap -14.02%
• Palantir -9.73%, its worst day since February 4
• CrowdStrike -9.88%
• Oracle -6.93%

What it could mean

AppLovin's jump shows that a strong report could still be rewarded on a very bad day, which may point to a market that is separating companies by results. It also comes from a stock down about 47% for the year, so part of it may be a rebound from a low base. The large drops on company news suggest little patience for disappointment when the broader market is falling.

On a day like this, do individual results still matter, or does the market's mood decide?

Brent rebounded about 4% amid uncertainty over an Iran deal to end the war

Brent crude rose about 4% on Thursday, to more than $98 a barrel, and WTI rose about 3%, to above $90. These figures come from late trading, not settlement prices. It was a rebound, not a surge: on Wednesday Brent had fallen 8.67% and WTI 8.29%. For the week so far, both are down about 13%.

Oil rose amid uncertainty that President Trump would pursue a deal with Iran to end the war in the Middle East. Optimism had grown overnight after Vice President JD Vance wrote in a post on X: "The reason we lost [the midterm elections] is the war." The post suggested the party should push for a resolution to the conflict. Overnight, Brent traded below $94.

Energy stocks did not follow oil up. The energy sector fund fell 2.98%.

The war in other markets

The Bank of England raised its rate a quarter point to 4% on an 8-1 vote, its first increase since 2023, with the one dissenter favoring a larger hike. The bank sees inflation rising to 5% by mid-2027. Governor Andrew Bailey said:

"Today's increase shouldn't be seen as the first in an inevitable long sequence of hikes. But unless the conflict in the Middle East is resolved, neither does it seem likely to be the last increase."

What it could mean

A deal to end the war could send oil lower, easing inflation concerns and helping consumers, which would tend to support stocks, while hurting energy producers. If no deal comes, higher oil could keep inflation and rates elevated, which may press on the same high-growth stocks already under pressure.

Does the election make a deal with Iran more likely, or does Thursday's rebound say the market doubts it?

Jobless claims came in below estimates, Airbnb jumped after hours, and the October jobs report comes Friday

Some of Thursday's economic reports were encouraging.

Jobless claims: initial filings totaled 189,000 for the week ended October 31, below the Dow Jones estimate of 197,000 and down from 195,000 the week before. That tied for the lowest since July, itself the lowest going back to September 1969. Continuing claims rose 23,000 to 1.72 million.

Productivity: up 3.6% in the third quarter, against an estimate of 2.9% and 2.1% in the second quarter. Unit labor costs fell 0.7%. Labor's share of output slipped to 53%, the lowest in a series that goes back to 1947.

Layoff plans: Challenger, Gray & Christmas counted 43,994 announced job cuts in October, up slightly from September and down 71% from a year earlier.

The Fed and Friday

The talk about the Federal Reserve's December 9 meeting is about a rate hike, not a cut. At midday Thursday, futures put the odds of a quarter-point increase from the current 3.75% to 4.00% range at 70.1%, down from 82.7% on Wednesday, according to the CME FedWatch tool.

Friday brings the October jobs report. The Dow Jones consensus is a gain of 59,000 payrolls.

After hours

Airbnb reported third-quarter results on Thursday. The stock closed down 3.54% at $170.13, then traded up 10.24% at $187.55 at 4:46 p.m. ET and up 10.80% at 5:01 p.m. ET. These prices were still moving, and no news report explaining the move had been read when this was written.

What it could mean

Low claims and strong productivity suggest an economy holding up, which could support stocks outside technology if the selling stays centered on AI. The same strength could keep a December hike in play. A weak jobs number could lower those odds, helping rate-sensitive stocks, but could also add a growth worry to a market already on edge.

Would a soft jobs report on Friday calm this market, or give it one more thing to fear?