Investing.com -- The Nasdaq Composite rebounded Friday as some investors bought the dip in chip stocks following a punishing selloff that pushed the index into correction territory.
The Nasdaq rose 1.09% to 24,579.42. The S&P 500 gained 0.31% to 7,376.86, while the Dow Jones Industrial Average slipped 237.33 points, or 0.46%, to 51,285.73.
Thursday's rout was driven by fears of a slowdown in data center construction after sweeping Democratic wins in the House, Senate and key state governorships. The three major indexes had their worst one-day losses since April 2025. The Nasdaq fell 5.5%, closing more than 10% below its recent high, the S&P 500 lost 4.4%, and the Dow dropped more than 1,800 points, or 3.4%.
All 11 S&P 500 sectors closed lower that day, led by companies tied to the AI buildout.
For the week, all three averages declined despite Wednesday's post-election rally. The Nasdaq lost 3.4% and the S&P 500 fell 2.7%, while the Dow outperformed with a 0.9% drop.
Investors head into this week on shaky ground, with unease over the AI trade ahead of inflation data and tech earnings.
The October consumer price index, perhaps the most closely watched inflation gauge, is due Tuesday. Investors expect the Federal Reserve to raise rates in December after holding steady last month, following a hike in September, its first in three years.
Traders trimmed rate-hike bets modestly during Thursday's selloff, but after a strong jobs report Friday, fed funds futures implied about an 80% chance of a hike at the Dec. 8-9 meeting, according to LSEG data. Investors will look to the CPI report for clues on the path into 2027, with about two more quarter-point increases expected this cycle.
UBS strategists said they project core CPI rose 0.23% and headline CPI rose 0.26% in October, "a notable slowdown from September." They expect existing home sales likely slowed in October.
Initial jobless claims "should hit a pothole," the strategists said, falling by 7,000 to 182,000 in the week ending Nov. 7 as New York "took its entire UI system offline."
UBS expects multiple Fed speakers to offer their views on the economic outlook, and said most comments will likely suggest they favor a December rate hike.
Also this week, earnings are due from several high-profile companies including CoreWeave, Applied Materials and Cisco Systems. Take-Two Interactive, Rocket Lab and Nebius are also set to report.
What analysts are saying about U.S. equities
Yardeni Research: "The AI selloff went global last week. In the U.S., Democrats swept Congress in the midterm elections on Tuesday, November 3, surfing on a huge wave of voter hostility toward new data centers. On Thursday, investors dumped the AI trade worldwide, and Asia's chipmakers took the brunt of the wipeout. Overseas earnings are still climbing, but valuations keep falling. We see the AI backlash as a speed bump, not a roadblock, at home and abroad."
Morgan Stanley: "The correction is entering its final phase, in our view, as the S&P catches down to breadth and approaches our 7100–7300 downside range. A final retest of last week's lows likely sets up a year-end rally. We recommend adding quality cyclicals with strong EPS revisions as the market carves out a low."
JPMorgan: "We stay with the broadening call, however, we do not think AI is a continued sell here. In fact, Tech drawdown is offering certain opportunities. The selloff was very sharp, and P/E compression extreme. The S&P 500 long-short momentum factor has lost all the ytd returns."
RBC Capital Markets: "Our sentiment and valuation work tells us the US equity market is at a crossroads. If the midterm results end up being a shock that simply requires some repricing and repositioning, the low will probably be in before too long if it isn't already. If we have a significant challenge to the earnings and economic outlook looming, that is something the U.S. equity market still needs to price."
"We think the current pullback is likely to stay in tier 1 territory (i.e. the S&P 500 is unlikely to fall below 7000) but are keeping a close eye on the risk factors that might push us into tier 2. The moment of truth we suspect will come in early calendar 1Q in the next reporting season when companies issue year ahead outlooks."
Evercore ISI: "The Democratic sweep and resulting volatility from fears of an AI data center slowdown saw the market plunge. For bulls and bears, the environment feels less like a wave to be surfed and more like a riptide to be avoided. We see it differently - an opportunity for Trump to forge his legacy as the "AI President", working across the aisle with governors and congress, not to muzzle AI but manage it, partnering with corporate America."
"The medium-term outlook into 2027 is similarly favorable as the valuation/EPS trajectory for stocks, especially Tech, have been discounting AI concerns for months."
Original Article
Dow Jones, Nasdaq, S&P 500 preview: Inflation data, earnings loom after AI rout
Wall Street strategists say S&P 500 correction is likely nearing an end
U.S. futures muted as Nvidia probe and AI earnings gauntlet test tech rebound
