The Macro Landscape

AI Stock Rout Dominates After Midterm Election Results

Markets are reeling from a historic sell-off triggered by the Democratic sweep of both chambers of Congress in Tuesday's midterm elections. The Nasdaq Composite plunged over 5.5% on Thursday, November 5, entering correction territory as investors dumped AI and data-centre-linked stocks on fears that a Democratic Congress could impose new regulations on the artificial intelligence industry and slow the data centre buildout. The rout erased roughly $2.9 trillion in market capitalisation from technology companies in a single session, marking one of the worst days for the index in years. Futures on Friday morning are mixed, with Nasdaq futures rebounding modestly while the Dow and S&P 500 hover near flat as traders assess whether the sell-off has been overdone ahead of the jobs report.

October Jobs Report in Focus

The Bureau of Labor Statistics is set to release October nonfarm payrolls at 8:30 AM Eastern on Friday. Consensus expectations point to an increase of roughly 55,000 to 65,000 jobs, a modest improvement from September's surprisingly soft 29,000 print. The unemployment rate is expected to hold near 4.2%, while average hourly earnings growth is projected to remain around 3.0% year-over-year. A stronger-than-expected report could reignite concerns about potential Federal Reserve rate hikes, adding to an already volatile backdrop, while a weak number could deepen worries about slowing economic momentum.

Federal Reserve Policy and Rate Expectations

The Fed held its benchmark rate steady at the 3.75%–4.00% target range at its October meeting and has signalled a cautious, data-dependent posture amid still-elevated inflation. The effective federal funds rate stood at 3.88% as of November 4. Fed funds futures markets are now pricing in the possibility of rates rising toward 4.1% by February and potentially reaching 4.5% by late 2027, reflecting a shift in expectations away from near-term cuts and toward a prolonged hold or even further tightening. The combination of political uncertainty and sticky inflation has complicated the central bank's path forward.

Midterm Election Fallout and Policy Outlook

Democrats won control of both the House and the Senate, ousting at least 30 Republican incumbents and securing over 250 House seats. Markets initially rallied on Wednesday after President Trump accepted the results, easing fears of a prolonged political dispute, with the S&P 500 gaining nearly 2% and the Dow rallying more than 3% in that session. However, sentiment reversed sharply on Thursday as investors turned their attention to the policy implications, particularly the prospect of tighter regulation on AI and energy-intensive data centres. Analysts note that a divided government historically tends to be market-friendly, but the scale of the Democratic mandate has unsettled technology investors in particular.

Global Markets and Risk Appetite

The sell-off in US equities rippled across global markets, with AI-related shares tumbling in Asian trading as midterm results became clear. The S&P 500 has declined roughly 5.5% over the past month, though it remains about 9.6% higher year-over-year. Volatility gauges have spiked sharply, and attention is also being drawn to the massive capital expenditure cycle among hyperscale cloud companies, which are expected to invest approximately $800 billion this year. The central question for global investors is no longer simply whether growth continues, but whether the regulatory and monetary backdrop will allow the AI-driven expansion to be financed affordably.

Sources

• Stock market today: Dow, S&P 500, Nasdaq futures wobble after brutal sell-off, with key jobs report on deck
• Stock Market Today, Nov. 6: Futures Mixed as Nasdaq Futures Rebound After Tech Selloff
• US Stocks Crash as Election Fallout Hits Wall Street – Nasdaq Plunges 5.52%
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• How Will the 2026 Midterm Results Affect Investors?
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• Stocks rally as Trump accepts Democratic midterm sweep
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• Federal Reserve Board - H.15 - Selected Interest Rates (Daily) - November 04, 2026
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• October Jobs Report Seen Showing Resilient Labor Market
• Stronger-than-expected Nonfarm Payrolls Could Reignite Fed Hike Fears
• US October Nonfarm Payrolls Preview: Can Employment Rebound?
• US Jobs Report: Latest Nonfarm Payrolls and Release Schedule
• Global Macro and Markets Briefing - 02 November 2026
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• United States Stock Market Index