Nasdaq closes in a correction as chip stocks sink 12%; S&P 500 falls 4.4%

Explain terms

What happened today

The S&P 500 fell 334.89 points, or 4.36%, to 7,353.73. The Nasdaq Composite fell 1,421.52 points, or 5.52%, to 24,315.00, and the Dow fell 1,833.06 points, or 3.44%, to 51,523.06. The Nasdaq's close is more than 10% below its Oct. 6 record close of 27,599.89, the usual definition of a correction.

The PHLX Semiconductor Index fell 12.25% to 9,011.14, and the Russell 2000 of smaller companies fell 4.45%. The VIX, Wall Street's main volatility gauge, jumped 69.66% to 28.18.

The sell-off wiped out Wednesday's post-midterm rally, when the Dow had gained 1,569 points. Gold futures rose 0.67% to $4,100.40 and WTI crude rose 3.22% to $90.96. The 10-year Treasury yield slipped to about 4.84%.

Our read

This was not a verdict on the economy. Jobless claims fell and productivity was strong, yet the S&P 500 still fell 4.4%. The election changed the politics around AI data centers, and that hit the most crowded trade in the market all at once. Money left the AI winners and went into gold and Treasuries, a sign that investors are now asking for proof that AI spending will pay off.

The news, then the reaction

Following up our Breaking Brief: the Nasdaq correction

What we reported: At 10:15 AM CT our Breaking Brief said the Nasdaq Composite was on track for a correction, down nearly 4% at 24,712.60. At 12:40 PM CT we updated it: the Nasdaq was down 5.2% and the chip index was down 11%, per Reuters.
What happened after: The move got bigger into the close. The Nasdaq ended down 5.52% at 24,315.00 and the chip index down 12.25%. The correction is confirmed by the close: the index ended more than 10% below its Oct. 6 record. Our report held up and the decline extended.
What to watch next: Friday's October jobs report at 7:30 AM CT is the next scheduled test.

Bank of England raises rates (6:00 AM CT)

Before: Around 5:00 AM CT, Nasdaq 100 futures were down 0.51% and S&P 500 futures up 0.17%. Gold futures were up 1.74% at $4,144.00, as our Morning Brief reported. Economists in a Reuters poll expected a quarter-point hike to 4.00% with a 7-2 vote.
The news: The Bank of England raised rates for the first time since 2023 and signalled that more hikes may be needed if the Iran war continues, Reuters reported. Yahoo Finance reported the new rate as 4% with an 8-1 vote; the poll had expected 7-2.
After: By about 8:05 AM CT, Nasdaq 100 futures were down 0.8% while S&P 500 futures were up 0.1%, according to Reuters. The split showed the early pressure was on tech, not the whole market.

Jobless claims and productivity (7:30 AM CT)

Before: Spot gold was near $4,119.50, up 1.49%, in early US trading, per Kitco.
The news: Initial jobless claims fell 6,000 to 189,000 for the week ended Oct. 31, per Kitco's report on the Labor Department data. Third-quarter productivity rose at a 3.6% annual rate and unit labor costs fell 0.7%, per Kitco's report on the Labor Department data.
After: Gold showed no significant reaction to the claims data, Kitco reported, and spot gold was last at $4,120.60, up 1.5%.

The open and the chip sell-off (8:30 AM CT onward)

Before: Stocks opened mixed, Yahoo Finance reported.
The news: Chip stocks sold off right after the open. Qualcomm fell about 9% early after missing estimates for smartphone chip sales, Reuters reported.
After: At 8:57 AM CT the Nasdaq was down 3.09% and the S&P 500 down 1.66% (Reuters). By about 10:37 AM CT the Nasdaq was down more than 5% and the S&P 500 more than 3% (Yahoo Finance).

Why it moved

Reuters tied the sell-off to growing opposition to data-center expansion in key states after the Democrats' midterm wins. "We suspect there is going to be some scrutiny on this aggressive AI buildout."^{Ipek Ozkardeskaya, Swissquote Bank} "The blue wave therefore raises the political risk premium around US AI."^{Masahiko Loo, State Street Investment Management}

"Disappointing earnings and the Dem sweep potentially slowing the AI buildout are pressing sentiment." He said hedge funds had been selling chip stocks heavily for weeks.^{Mark Hackett, Nationwide} He said the move came from hedge funds locking in profits before year-end, not from weaker fundamentals: "They're shooting the generals."^{Charlie McElligott, Nomura}

Earnings also weighed on the market. Qualcomm slid 9% after its smartphone chip sales missed estimates, and Snap fell 12% early after missing revenue estimates (Reuters). AppLovin was the exception, rising 32% early after beating profit estimates.

Selling went beyond chips. Tesla fell 9.5% early and Dell fell 10.5% (Reuters). Everyday investors sold a net $358 million in individual US stocks by 1:58 PM CT, putting them on track for their biggest selling day since 2020, according to Vanda Research data reported by Yahoo Finance. "This is what we would call a total capitulation by retail investors."^{Viraj Patel, Vanda Research}

On rates, Cleveland Fed President Beth Hammack said Thursday she favors a gradual path of rate hikes to bring inflation down, and Reuters reported traders expect the Fed to hike next month. Oil rebounded after an almost 9% drop on Wednesday, and Brent crude rose 2.58% to about $97 (Reuters).

Tonight in Asia

We could not confirm a major scheduled Asia-Pacific release tonight from a primary source. The thing to watch is how chip-heavy markets in Seoul, Taipei and Tokyo open after the US chip index's 12% drop.

Tomorrow

Time CT	Event	Consensus
7:30 AM	Jobs report, Oct (nonfarm payrolls)	+65,000 (FactSet)
7:30 AM	Unemployment rate, Oct	4.2% (FactSet)
7:30 AM	Average hourly earnings, Oct	—
11:15 AM	Fed Vice Chair Bowman speaks	—

What we're watching

The jobs report is the first big data point since the sell-off. FactSet's median forecast is 65,000 new jobs, after September's 29,000, which missed the 94,000 forecast. Reuters reports traders expect a Fed hike at the Dec. 8–9 meeting. After the Nasdaq fell below its 200-day moving average, he told Yahoo Finance to expect more choppiness.^{Kevin Mahn, Hennion & Walsh} We will also watch Airbnb and Lumentum results released after the bell. We could not confirm their after-hours moves from an approved source before publishing.

What it means for your money

The S&P 500 fell 4.36% and the Nasdaq 5.52%. Broad stock index funds, the kind in many 401(k)s, will show lower balances tonight. A one-day drop is the same holdings priced lower, not money gone, and today's selling was led by AI and chip stocks, even though smaller companies fell just as much. The 10-year Treasury yield, which mortgage rates loosely follow, edged down to about 4.84%, while oil rebounded more than 3%.

The short version (the what and the result)

The S&P 500 fell 4.36% to 7,353.73 and the Dow fell 1,833 points.
The Nasdaq fell 5.52% to 24,315.00 and closed in a correction, more than 10% below its October record; chip stocks sank 12.25%.
Reuters tied the sell-off to worries that the midterm results will slow the AI data-center buildout; Qualcomm's miss added pressure.
Gold futures rose 0.67% to $4,100.40, and the October jobs report is due Friday at 7:30 AM CT.