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London Quick Take - 5 Things to Know in Markets Today - 6 Nov
5 to Know in Markets Today -AI selloff
1.Extraordinary market action
"The Stock Market crashed today because the Dumocrats had a big Tuesday – So sad to see, you only had yourselves to blame!" - Donald Trump. Such a perfect encapsulation of events.
Extraordinary market action yesterday. Citadel says retail investors displayed the most aggressive selling in the first 30 minutes of a session since April 7, 2025, concentrated in large-cap technology, semiconductor, and memory stocks. It followed the sixth-largest net selling day over the past year, which it says ended a run of 22 consecutive sessions of net buying by retail. Retail threw in the towel finally after the mass de-grossing by funds. The market rallied on Wednesday as the risk of Trump contesting the election receded and markets fixated on de-escalation in the Middle East. By Thursday the focus had switched back to the risk of Democrats slowing the AI buildout.
Extraordinary market action yesterday. Citadel says retail investors displayed the most aggressive selling in the first 30 minutes of a session since April 7, 2025, concentrated in large-cap technology, semiconductor, and memory stocks. It followed the sixth-largest net selling day over the past year, which it says ended a run of 22 consecutive sessions of net buying by retail. Retail threw in the towel finally after the mass de-grossing by funds. The market rallied on Wednesday as the risk of Trump contesting the election receded and markets fixated on de-escalation in the Middle East. By Thursday the focus had switched back to the risk of Democrats slowing the AI buildout.
2.Big losses, not the biggest
The Nasdaq Composite fell –5.5% for its worst day since April 2025 (Liberation Day tariffs if you remember that), while the Nasdaq-100 was hammered –6.36% in a brutal and pretty indiscriminate selloff. The S&P 500 finished –4.36% lower while the Dow Jones declined –3.44%. Very little in the green. Semis (SOXX) were down a monster 12% with Nvidia –9% lower and now about 25% below its ATH. Elon Musk stocks took a battering with SpaceX –9% and Tesla –11%. They've lost a combined $420bn in market cap in the two days since the midterm elections. Neoclouds down ~10% with Microsoft apparently pulling deals with the likes of Nscale, Nebius and IREN.
3.Was this the 'one'?
Was this the 'one', the big crash everyone has known was likely at some point? The worst single day in Nasdaq history was March 13, 2020, when the index plummeted 12.3%. Other days in '20 '08 and '87 saw declines of around -9%. I still think light positioning, still very strong earnings growth, lower multiples (even lower now!), broadening leadership and seasonality supports the case for a year-end rally, but the bar has just been set a little higher now as we'll need a roughly 12% rally in NDX and 5% gain in SPX to get back to the late October high. For the year the Nasdaq Composite is still +4.6% higher. Nasdaq-100 futures are more than 1% higher this morning while SPX futs trade +0.3% firmer and Dow futs are off by –0.8%.
The fear is Democrats slow down AI, kill data centres and the infrastructure buildout. This seems overdone. AI is key to the economic engine of the US, and Democrats are unlikely to want to cook the golden goose. To borrow from one Democrat strategist, James Carville - it's the economy, stupid. A challenge to the assumed speed of the buildout is not the same thing as an end to the investment cycle. Multi-year lows in semiconductor valuations are at odds with the reality on the ground.
The fear is Democrats slow down AI, kill data centres and the infrastructure buildout. This seems overdone. AI is key to the economic engine of the US, and Democrats are unlikely to want to cook the golden goose. To borrow from one Democrat strategist, James Carville - it's the economy, stupid. A challenge to the assumed speed of the buildout is not the same thing as an end to the investment cycle. Multi-year lows in semiconductor valuations are at odds with the reality on the ground.
4.Memory fears seem overblown
The market has gone too far in pricing a memory downturn for Samsung and SK Hynix et al. GS points out – before today's 10% move lower for SK Hynix and –6% drop for Samsung - the market was pricing a 65% cut to 2027 earnings, which means profits would need to collapse over 70%. The worst case is already in the price, they say. The Kospi plunged –6% but remains ~30% higher YTD. In Japan the tech-heavy Nikkei 225 was also –6% lower as the tech rout spread to Asia.
5.Setup looks compelling for stocks
Europe is not immune and stock markets dropped hard on Friday as investors pulled money out of stocks to get clear of this train wreck, with other sectors that ought to be fairly insulated from the tech rout being affected. The AI pullback has turned into a broader derisking event. The FTSE 100 was down –1.5% though remains ~7% higher YTD. IAG rallied 1% despite a profits miss and warning annual capacity would be down this year. Operating profit was down –16%, which didn't look too clever against the increase for Air France and Lufthansa. Fuel costs are a big problem, but non-fuel costs were also an issue. Elsewhere, Brent trades down below $98 after a rebound off its 200-day line yesterday saw it briefly spike back above $100, while gold has backed off a touch after spiking towards $4,150/oz yesterday, last around $4,072.