On Thursday, all three major U.S. stock indexes suffered steep declines. Democrats secured control of both chambers of the U.S. Congress in the midterm elections, fueling market concerns that the new legislative majority will tighten regulation on artificial intelligence (AI) related spending and data center construction. The political shockwave detonated in the stock market with a delay. Technology stocks were hammered, with the AI hardware supply chain hit by a wave of collective selling. The "fear index" VIX surged. Oil prices climbed. Gold spiked then pulled back.
U.S. Stocks
At the close, the Dow Jones Industrial Average fell 1,833.06 points, or 3.44%, to 51,523.06; the S&P 500 dropped 334.89 points, or 4.36%, to 7,353.73; and the Nasdaq Composite plunged 1,421.52 points, or 5.52%, to 24,315.00. Democrats taking control of Congress in the midterm elections triggered worries about stricter regulation of the AI industry, and the AI hardware supply chain faced a wave of collective selling, with chip, memory, semiconductor equipment and optical communications sectors posting broad, sharp declines. The Philadelphia Semiconductor Index plunged 12% in a single day, its biggest drop since 2020. NVIDIA (NVDA.US) fell 9% on the day, erasing all of its year-to-date gains; Advanced Micro Devices (AMD.US) dropped more than 17%. Memory stocks were crushed, with SanDisk Corp. (SNDK.US) plunging 22%, while Western Digital (WDC.US) and Micron Technology (MU.US) fell more than 17%. Taiwan Semiconductor Manufacturing (TSM.US) dropped nearly 11%, and ASML Holding NV (ASML.US) fell more than 9%. Lumentum (LITE.US) and Credo Technology Group Holding Ltd (CRDO.US) slid nearly 18%, while Marvell Technology (MRVL.US) dropped more than 16%. Neocloud-related stocks also came under selling pressure, with CoreWeave, Inc. (CRWV.US) falling another 10%. In addition, the "fear index" VIX soared 70% to its highest level since early April.
European Stocks
Germany's DAX 30 fell 112.66 points, or 0.43%, to 26,325.01; the UK's FTSE 100 dropped 46.55 points, or 0.43%, to 10,782.66; France's CAC 40 rose 27.48 points, or 0.34%, to 8,205.37; the Euro Stoxx 50 fell 17.86 points, or 0.29%, to 6,247.85; Spain's IBEX 35 gained 115.10 points, or 0.59%, to 19,486.00; and Italy's FTSE MIB dropped 525.15 points, or 1.03%, to 50,505.87.
Asia-Pacific Markets
Japan's Nikkei 225 fell 1.79%, South Korea's KOSPI dropped 5.28%, India's BSE SENSEX rose 2.60%, and Indonesia's composite index gained 2.25%.
Forex
The U.S. Dollar Index (DXY), which measures the greenback against a basket of six major currencies, rose 0.02% to 101.58.
Cryptocurrencies
Cryptocurrencies declined. Over the past 24 hours, Bitcoin fell more than 6% to $7.53, giving back all of the previous day's gains; Ethereum dropped nearly 9% to $2,210.7.
Precious Metals
In late New York trading on Thursday (November 5), spot gold rose 0.7% to $4,089.15 per ounce, trading in positive territory almost all day, climbing notably in the Asian morning session before fluctuating lower, and forming a W-shaped pattern in the U.S. morning session. Spot silver fell 0.84% to $51.7798 per ounce.
Crude Oil
December WTI crude oil futures settled up $2.40, or more than 2.72%, at $90.52 per barrel, moving away from the lowest close since October 7 of $88.12, and rising steadily since the Asian midday session. January Brent crude oil futures settled up $3.67, or nearly 3.88%, at $98.29 per barrel.
Metals
LME copper fell $168 to $13,844 per ton. LME aluminum rose $17 to $3,064 per ton. LME zinc fell $14 to $3,793 per ton. LME lead rose $12 to $1,894 per ton. LME nickel gained $543 to $16,322 per ton. LME tin dropped $1,516 to $45,479 per ton. LME cobalt was flat.
Macro News
Goldman Sachs trading desk "phones blew up but no buyers showed": midterm election results triggered an AI trade retreat, with the Nasdaq shedding over $2 trillion in a single day. In Thursday's overnight U.S. session, Goldman Sachs Group's equity trading desk was overwhelmed by investor inquiries, with everyone asking the same question: how much further will the tech selloff go? Yet genuine buyers stepping in were hard to find. According to John Flood, head of Americas equity execution services at Goldman Sachs, Wednesday (midterm election day) was one of the bank's busiest trading days of the year. By Thursday, the picture was completely reversed. "Today it's completely flipped," Flood wrote in a note to clients on Thursday. "Our phones were blowing up with people asking about the market. Unfortunately, we didn't see much actual trading." Flood said long-only institutions had once again frozen into a wait-and-see stance. These investors had aggressively cut risk exposure before the midterm elections, only to be caught off guard by Wednesday's rebound and drawn back into the market, and now hedge funds are selling the AI hyperscaler stocks they had just bought the previous trading day. More concerning to the market is the absence of buyers. According to Goldman Sachs client feedback, brokerage firms with large retail exposure reported a second consecutive day of significant net selling imbalance among retail investors.
Market bets on a December rate hike fall to 70%: Fed hawks insist on "small, gradual steps." On Thursday, two Federal Reserve officials publicly advocated for small, steady rate hikes to address inflation that remains above target. This was the central bank officials' first round of public remarks after the midterm elections, in which Democrats won control of Congress and expanded seats at the state level, potentially altering the path of price pressures in the economy. Cleveland Fed President Beth Hammack said in a speech ahead of an event in Zurich: "I expect monetary policy will need to move to a restrictive stance to bring inflation back to 2% in a timely manner." One of the most steadfast rate-hike advocates within the central bank believes this stance should be achieved "through more frequent, smaller adjustments where possible," an approach that causes less disruption to households, businesses and financial markets. She also said gradual rate hikes would help prevent an "inflation mindset" from taking root among the public. Richmond Fed President Thomas Barkin echoed Hammack's path assessment in remarks in Charlotte. He said inflation is "too high" and is "sitting at elevated levels" rather than declining. For central bank officials, "the policy implication is fairly straightforward," and regarding the pace of future rate hikes, "gradual is reasonable."
Treasuries in demand, curve bull-steepens. The stock market rout provided strong safe-haven buying support for U.S. Treasuries. On Thursday, the 10-year Treasury yield fell about 6 basis points to 4.83%, while the 2-year yield had already declined about 17 basis points since before the election, with the yield curve showing a classic bull-steepening pattern. The Treasury market interpreted a Democratic sweep of Congress more as a signal of fiscal restraint, as political gridlock between a Republican White House and a Democratic Congress could constrain the Trump administration's legislative agenda of tax cuts and expanded spending, thereby reducing expectations for medium-term Treasury issuance supply. Meanwhile, South Korea is reportedly considering large-scale purchases of long-term U.S. Treasuries as one measure to bolster foreign exchange reserves and strengthen economic ties with Washington, providing potential incremental support for Treasury demand. However, South Korea has denied media reports that the government is considering large-scale purchases of long-term U.S. government bonds to increase foreign exchange reserves.
Individual Stock News
IREN Ltd (IREN.US) Q1 AI cloud revenue surged 182% quarter-over-quarter, with $20 billion in backlog orders in hand. The company posted quarterly revenue of $228 million, up 66% quarter-over-quarter, beating market expectations of $221 million; net loss of $263 million, significantly narrower than the previous quarter's $684 million; adjusted EBITDA of $66 million, up 247% quarter-over-quarter, with an adjusted EBITDA margin of 29%; loss per share of 66 cents, versus market expectations of a 48-cent loss per share. The AI cloud business was the absolute star of the quarter. Quarterly AI cloud revenue reached $200 million, up 182% quarter-over-quarter (from $71 million the previous quarter), including $135 million in AI cloud services revenue and $65 million in AI cloud leasing revenue; the AI cloud segment gross margin reached 86%, flat versus the previous quarter. The core driver of the revenue jump was the delivery of the Horizon 1 data center. The company's operating IT capacity (IT-MW) grew 127% quarter-over-quarter, from 41 megawatts to 93 megawatts (about 0.1 GW).
Airbnb (ABNB.US) Q3 accelerated across the board: revenue growth of 19% was the fastest in over three years, a new $12 billion buyback was added, and full-year guidance was raised. The earnings report showed Airbnb generated third-quarter revenue of $4.87 billion, up 19% year-over-year (up 16% on a constant-currency basis), beating market expectations of $4.75 billion and marking the company's fastest revenue growth in more than three years; gross booking value (GBV) was $27.7 billion, up 21% year-over-year, accelerating by 5 percentage points quarter-over-quarter; nights and seats booked reached 155 million, up 16% year-over-year, a significant acceleration from 10% in the second quarter and 9% a year earlier. Profitability was equally strong: net income of $1.89 billion, up 38% year-over-year, with a net margin of 39%; diluted earnings per share of $3.16, beating market expectations of $2.85 (compared with $2.21 a year earlier). Capital return efforts were significantly stepped up: the company repurchased $700 million of Class A shares in the quarter and announced a new buyback authorization of up to $12 billion, which combined with the remaining $2.7 billion authorization gives total "firepower" of nearly $15 billion.
Q3 results and guidance both beat expectations, and Cloudflare surged in after-hours trading. The earnings report showed Cloudflare's third-quarter adjusted earnings per share (EPS) was $0.38, versus analyst expectations of $0.35; third-quarter adjusted operating profit was $137.1 million, versus analyst expectations of $130.1 million; third-quarter revenue was $782.5 million, versus analyst expectations of $741.6 million. The company expects full-year revenue of about $2.96 billion, compared with its previous forecast of $2.86 billion to $2.87 billion; it expects fourth-quarter revenue of $845 million to $846 million, versus analyst expectations of $799 million.
In the tech-stock-driven credit downturn, SpaceX (SPCX.US) default risk hit a record high. As concerns about tighter regulation of the AI industry resurfaced, Elon Musk's space exploration company SpaceX and CoreWeave became among the hardest-hit entities in a broad credit downturn. The yield on one of CoreWeave's bonds surged to a record high above 17%. At the same time, the cost of insuring against a SpaceX debt default (CDS, credit default swaps) also rose to an all-time high. Market observers warned that a sweeping Democratic victory could strengthen the party's ability to scrutinize Elon Musk's actions and hinder the anticipated merger between SpaceX and Tesla (TSLA.US).
Google (GOOGL.US) will invest $17 billion to build its first company data center in Wyoming, USA. Google has pledged to invest $17 billion to build Google's first data center in Wyoming and signed binding agreements with Tallgrass Energy, Black Hills Energy, American Electric Power and Related Digital to bring jobs and infrastructure to Laramie County. Google is providing $17 billion in capital, while Bloom Energy is supplying fuel cell technology. The project includes a 702-megawatt fuel cell development project equipped with carbon capture and storage, and has signed a contract with American Electric Power (AEP).
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