Two days after Democrats swept the midterms, Wall Street had its worst session in more than a year. The Nasdaq Composite fell 5.52% to 24315 and slipped into correction territory, losing $2.5 trillion in market value (WSJ, WSJ). The S&P 500 lost 4.36%, and every sector closed lower (WSJ).
The FT counted $3.2tn erased across U.S. stocks. By the FT's math, no single day has wiped more value from the S&P Composite 1500 in records reaching back to the turn of the millennium (FT).
Money stampeded into Treasurys. The 10-year yield sat around 4.870% this morning, near two-month lows (WSJ). Yet markets still see roughly 70% odds of a December Fed hike (IBD).
AI stocks are being marked down on political risk while the Fed keeps tightening on the table. That leaves today's October jobs report as the tiebreaker.
This Was About Washington, Not Just Earnings
The easy story is weak chip earnings. CBOE's JJ Kinahan pointed to Qualcomm's report as the spark (WSJ). But earnings misses don't usually sink every sector at once. Politics does.
Several newly elected Democrats ran against data centers. Michigan senator-elect Abdul El-Sayed has called for a "full-on pause" in frontier AI work (FT). Incoming South Carolina senator Annie Andrews wants a two-year ban on building new data centres (FT). SYZ Group's Charles-Henry Monchau told the FT that investors now fear the peak in AI capital spending has already passed.
The damage:
Nvidia fell 9.3%, shedding more than $400bn in value; Micron dropped 17% and Broadcom 10% (FT)
The PHLX Semiconductor index had its worst day since the depths of the pandemic (WSJ)
Japan's Nikkei 225 entered a bear market and South Korea's Kospi closed more than 6% lower (WSJ)
Non-tech names fell too: Caterpillar slid 6.4% (FT)
The pros were already bleeding. Morgan Stanley said October saw the biggest active unwinding at stock-picking hedge funds in over a decade (WSJ). Goldman Sachs said tech-focused funds lost more than 4% on Thursday alone (WSJ).
Bonds Worked as a Haven. The Fed Could Change That.
WSJ columnist Telis Demos calls Thursday a textbook flight to safety. Over the past month, the S&P 500 is down around 5%, while the ICE BofA U.S. Treasury index is up close to 3%. The 10-year had touched 5.3% and now sits about half a point lower (WSJ).
The effective fed funds rate held at 3.88 from Oct. 24 through Nov. 4, while the 10-year yield slid from 5.12 on Oct. 20 to 4.9 on Nov. 4.
So how can bonds stay a haven if the Fed is still hiking? Richmond Fed President Thomas Barkin said Thursday that with joblessness close to record lows and inflation still elevated, the direction for rates is clear. For Barkin, the open question is speed, and he prefers moving gradually (CNBC).
The Fed's range is 3.75% to 4%. A December hike would lift it to 4% to 4.25% (IBD).
The stock rout briefly helped bonds by cutting hike odds from more than 80% to close to 70% (WSJ). This morning's futures bounce nudged CME odds back from 67% to 70% (IBD).
Why Today's Jobs Number Is the Swing Factor
The consensus looks unremarkable:
Econoday forecasters expect 62,000 payrolls, 64,000 of them private, with unemployment steady at 4.2% (IBD)
FactSet's survey says 65,000; the Chicago Fed sees unemployment dipping to 4.1% (Barron's)
ADP showed 86,000 private jobs in October, and jobless claims fell to 189,000 (Barron's)
The detail underneath matters more. Yearly wage growth is forecast at 2.9%, which would be its first dip below 3% since May 2021 (IBD). Barron's describes a market where hiring, quitting and layoffs are all running low at the same time. Cleveland Fed economist Bruce Fallick calls that unusual outside a recession and a sign the labor market is more exposed to shocks.
The WSJ expects yields to react to the print, with hot data raising December hike odds. A hot number squeezes stocks and bonds at once. A soft one, especially on wages, gives bonds room to rally and the Fed a reason to wait.
Opposing Views
The Bull Case
Columbia Threadneedle's Anthony Willis thinks Thursday was an overreaction. "The Democrats are not going to want to crush this momentum," Willis said (WSJ).
Nasdaq futures rose 1.6% this morning and Nvidia gained close to 4% premarket (WSJ). Barron's notes Micron closed Thursday at just 3.7 times fiscal 2027 earnings (Barron's). Data-center operator TeraWulf posted $62.9 million in computing lease revenue against a $49.6 million estimate, and peer Iren's AI revenue jumped 182% (Barron's).
The Bear Case
Jeff Snider argues AI is mostly a debt story tracing the path of past tech bubbles. Snider would rather see it burst soon than in two years, when far more debt would be tied up in excess capacity (Wealthion). Barkin himself flagged hyperscaler debt issuance of better than $500 billion this year as worth watching (CNBC). Vital Knowledge's Adam Crisafulli described investors giving up and selling everything (FT).
Conclusion
The AI trade now carries political risk it didn't price a week ago, and the Fed isn't riding to the rescue. Today's jobs report decides whether bonds keep cushioning the fall or join it.
Watch wage growth, not just payrolls: yearly pay gains are forecast at 2.9%, which would be the first reading under 3% since May 2021.
A hot print raises December hike odds and can hit stocks and bonds together.
Treasurys have beaten both stocks and high-grade corporate bonds over the past month.
Cheap chip valuations only hold if data-center demand survives the new Congress.
AI-linked debt, not just AI stocks, is where the next stress could show up.
Sources
Wall Street Gets $2.5 Trillion AI Reality Check With Historic Rout of Tech Stocks - WSJ, 2026-11-05
Wall Street sheds $3.2tn as Democratic midterm sweep triggers brutal AI rout - FT, 2026-11-05
U.S. Stocks Slide as AI Rally Hits a Wall - WSJ, 2026-11-05
Nasdaq Futures Rally After Asian AI Rout as Investors Brace for Jobs Day - WSJ, 2026-11-06
Hedge Funds Dump Positions and Cut Staff as Selloff Deepens - WSJ, 2026-11-06
Jobs Report Due As Fed Rate Hike Looms Despite Sell-Off (Live Coverage) - IBD, 2026-11-06
A Good Jobs Report Is a Green Light for the Fed - Barron's, 2026-11-05
Barkin sees interest rate hikes ahead, but at a gradual pace - CNBC, 2026-11-05
The Argument for Buying Treasury Bonds Is Still Strong - WSJ, 2026-11-06
Why Micron's Stock Valuation Now Looks Ridiculous - Barron's, 2026-11-06
The AI Bet Is Paying Off for TeraWulf and Its Big Buildout Is Just Getting Started - Barron's, 2026-11-06
The Credit Market Warning That Could Hit Stocks | Jeff Snider - Wealthion (YouTube), 2026-11-04
Fed funds rate vs. 10-year Treasury yield - Source: FRED, Federal Reserve Bank of St. Louis (DFF, DGS10)
Fed funds rate vs. 10-year Treasury yield - Source: FRED, Federal Reserve Bank of St. Louis (DFF, DGS10)
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