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Financial Markets 11/05 15:33
NEW YORK (AP) -- A brutal sell-off swept through Wall Street Thursday, led
by stocks tied to the buildout of AI data centers. The wipeout more than erased
the U.S. stock market's gain from the day before, which was its best in three
months.
The S&P 500 fell 4.4% for its worst day since President Donald Trump shook
markets worldwide in April 2025 with his "Liberation Day" tariffs. The Dow
Jones Industrial Average sank 1,833 points, or 3.4%, while the Nasdaq composite
tumbled 5.5%.
The Nasdaq, which is full of AI-related and other tech stocks, sank 11.9%
below its all-time high set last month. Stock geeks call a loss of more than
10% a "correction."
Stock markets around the world felt pressure from continued drops for
companies that had benefited from the boom in the artificial-intelligence
technology industry, and South Korea's Kospi index tumbled 5.3%. Such stocks
have been swinging for months on worries that the construction of further AI
data centers may slow because of how expensive it's become to borrow money.
Critics also said AI stock prices had shot too high and were in a bubble.
Tuesday's U.S. midterm elections added another challenge. The nationwide
victories for Democrats raised the possibility that governments could force
pauses in construction of more data centers. Voters across political parties
say they're wary about AI and don't like the increases to power bills caused by
data centers.
Any slowdown in construction of AI data centers would mean fewer purchases
of AI chips, not to mention electricity and other products and services that
are getting vacuumed up in the AI frenzy, which is driving much of the U.S.
economy's growth.
Nvidia, the chip company that quickly became the face of the AI boom, fell
9.3% and was by far the heaviest weight on the S&P 500. It's now down 2.6% for
the year so far following annual gains of roughly 39%, 171% and 239% in the
last three years.
Advanced Micro Devices tumbled 17.3%. CoreWeave, a company that rents access
to AI chips to customers over the cloud, fell 9.8%. GE Vernova, which has been
helping to power data centers, sank 7.5%.
Compounding the pain for investors, AI chip stocks are some of Wall Street's
most influential because they've become some of the largest. A 1% move for
Nvidia, for example, has more effect on the S&P 500 than a 1% move for nearly
any other U.S. stock.
Thursday's losses were broad after gains for the majority of stocks on Wall
Street during the morning quickly evaporated.
Among the handful of winners was AppLovin, which jumped 31% after the
marketing platform reported both revenue and profit that topped analysts'
expectations. The company's board also approved a program to send up to $3.2
billion to investors by buying back its own stock, bringing the program's total
potential value to $3.6 billion.
Tapestry rallied 7.1% after the company behind the Coach and Kate Spade
brands likewise delivered a stronger profit than expected. It also raised its
forecasts for revenue and earnings this fiscal year.
Stock prices tend to follow where corporate profits and interest rates go
over the long term, depending on them much more than on who controls what in
Washington.
All told, the S&P 500 fell 334.89 points to 7,353.73. The Dow Jones
Industrial Average dropped 1,833.06 to 51,523.06, and the Nasdaq composite sank
1,421.52 to 24,315.00.
In other financial markets, the initial knee-jerk reaction to the U.S.
midterm election results faded a bit. The price of a barrel of Brent crude oil
rose 3.9% to $98.29 and recovered a chunk of its nearly 9% drop from the day
before. Uncertainty still reigns about what will happen in the war with Iran
and when the global energy industry can return to normal.
In the bond market, Treasury yields continued to tumble. The yield on the
10-year Treasury fell to 4.84% from 4.90% late Wednesday. It had been at 4.95%
on election night and above 5.30% last month. That could be a signal that
investors are herding into U.S. Treasury bonds in search of something that's
safer to own as stock prices tumble.
The drop in yields came despite some encouraging reports on the U.S.
economy. Fewer U.S. workers applied for unemployment benefits last week. A
separate report, meanwhile, suggested overall productivity for U.S. workers
improved by more during the summer than economists expected. That could help
the economy grow without adding pressure to the nation's high inflation.
In stock markets abroad, indexes were mixed in Europe and Asia. Besides
South Korea, Japan's Nikkei 225 also felt the sting of drops for tech and
AI-related stocks and sank 1.8%.
London's FTSE 100 dipped 0.4% after the Bank of England increased its main
interest rate for the first time in three years to help limit high inflation.
The bank said its next moves on interest rates will largely hinge on what
happens with the Iran war, which sent oil prices and inflation higher worldwide.
"We've seen encouraging news in the past 48 hours," Bank Gov. Andrew Bailey
said at a press briefing. "The best thing that can happen is to resolve the
conflict in the Middle East; there's no question about it."
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AP Business Writer Elaine Kurtenbach contributed to this report.
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