The U.S. market gave back the election rally in one day

Easy version of the November 6 morning note. It covers the prior U.S. session. This is not investment advice.

In one line, worry that data center spending could slow pulled AI-related stocks down together. A data center is a large building of computers that runs AI calculations.

An index is a score made by putting many stock prices into one basket. DK's close was S&P 500 down ▼ 4.36%, Nasdaq down ▼ 5.52%, Dow down ▼ 3.44%, and the small-company basket Russell 2000 down ▼ 4.45%. The Dow gave back the whole gain from the day after the midterm election. The Nasdaq was 11.9% below its October high, which DK called a correction, a drop of more than 10% from a high. A rumor said some hedge funds, funds that bet with pooled money, dumped shares. DK said that was not confirmed.

Every sector fell. Semiconductors fell ▼ 11.5%, information technology 8.0%, drugs 4.2%, industrials 4.1%, and discretionary consumer goods 3.8%. Energy and materials each fell 2.9%, financials 2.8%, health care 2.5%, real estate 1.7%, staples 0.7%, and utilities 0.6%.

Memory and storage were hit harder. A report that a memory-plant project in Taoyuan, Taiwan, stopped because of a labor dispute sent Micron down ▼ 17.25%. Worry that high memory prices could hurt PC and phone demand sent SanDisk down 22.18% and Seagate down 16.41%.

AI chips fell on worry that data center construction could be delayed. Nvidia fell ▼ 9.12%, AMD 17.47%, and Broadcom 10.55%. A report that China's approval for large H200 imports was delayed also weighed on Nvidia. Qualcomm fell 9.52%. Phone-chip revenue fell ▼ 26% because memory was scarce, and the next-quarter adjusted earnings-per-share outlook missed forecasts. Adjusted means one-time costs were removed. Arm fell ▼ 13.13% because royalty revenue, the fee others pay to use its designs, missed the consensus, the average analyst forecast.

Optical gear, equipment, and servers fell with them. Coherent beat earnings and guidance, the company's own outlook, but still fell ▼ 13.01%. Lumentum fell 18.62%, Lam Research 16.37%, and Dell 15.14%.

Companies that rent servers for AI computing also fell. A report that Microsoft would review outside data center contracts more strictly sent IREN down ▼ 16.90% and Nebius down 15.00%. Microsoft was also said to have skipped an extra-capacity option on a Texas deal with Nscale. CoreWeave fell 10.00%, and a report said its five-year CDS premium, an insurance-like price for the risk it cannot repay debt, hit a record. Power-equipment names fell on order-delay worry: GE Vernova 7.43%, Eaton 7.53%, and Bloom Energy 16.47%.

Big technology stocks fell on worry that AI spending may not turn into profit. Amazon fell ▼ 2.06%, Alphabet 2.16%, and Meta 3.89%. Worry that a Democratic Congress could watch Musk-related companies more closely sent Tesla down 10.85% and SpaceX down 9.15%.

In finance, worry about AI-infrastructure loans sent JPMorgan down ▼ 4.18% and Goldman Sachs down 6.39%. Bitcoin fell toward $76,000, and Strategy fell 9.27% while Coinbase fell 9.78%. Alibaba rose 2.66% and JD.com rose 3.35%.

After-hours, trading after the regular close, looked different. IonQ fell ▼ 10.22% in the regular session, but third-quarter revenue of $174 million, up 336%, beat forecasts and the company raised its yearly revenue outlook to $505 million to $515 million. It rose 2.56% after hours. IREN fell 16.90% in the regular session, then rose 4.77% after hours. First-quarter revenue of $228 million was up 66% from the prior quarter. AI-cloud revenue rose 182%, and backlog, orders not yet finished, was $20.3 billion. Cloudflare fell ▼ 8.03% in the regular session, then rose 14.32% after hours on revenue of $783 million, up 39%. In the regular session, AppLovin jumped 31.05% as AI-ad revenue rose 55%. Unity rose 15.00%.

Oil recovered part of the prior day's drop as U.S.-Iran uncertainty returned. WTI rose ▲ 2.72% to $90.52, and Brent rose 3.88% to $98.29. Reports said senior U.S. officials saw a higher chance of war, and two more tankers hit mines east of the Strait of Hormuz. Officials said the carrier Roosevelt would not arrive in the region before mid-November. Reports about an Iranian nuclear proposal conflicted.

Treasury yields, the price the U.S. government pays to borrow, fell as stocks crashed. The 2-year was 4.466%, the 10-year 4.839%, and the 30-year 5.258%. The dollar rose 0.03%, gold futures rose 0.61%, and bitcoin fell 4.68%. The chance of a December rate hike priced by rate futures fell from 82% to 66%. The Bank of England raised its policy rate by 0.25 percentage point to 4.00%. All nine voters agreed, and one preferred 0.50 point.

New jobless claims were 189,000, below the 196,000 forecast and the prior 195,000. Continuing claims were 1.718 million, above the 1.710 million forecast. Third-quarter productivity rose ▲ 3.6%, above the 2.8% forecast. Unit labor costs fell 0.7%, unlike the forecast.

Three lines to keep. Data center delay worry hit chips and AI infrastructure together. The stock drop pulled Treasury yields down and lowered the priced chance of a December hike. Some after-hours earnings were better, but they did not undo the regular-session drop.

The hedge-fund selling rumor was not confirmed either.