US Stock Market Trends | Nasdaq Closes Down 5.52%, Dow Jones Drops 1,833 Points

Heavy selling pressure on chip stocks dragged US stocks into a sharp decline on Thursday. Following a 3% drop on Wednesday, the Philadelphia Semiconductor Index plunged more than 12% on Thursday. The tech-heavy Nasdaq once slumped 5.73%, falling more than 10% from last month's high and entering technical correction territory. As for the Dow Jones, after surging more than 1,500 points on Wednesday, it opened 322 points higher on Thursday, with gains briefly expanding to a maximum of 354 points. However, it subsequently reversed sharply, skidding as much as 1,869 points or 3.5% to a low of 51,486 points, while the S&P 500 retreated by as much as 4.4%.

After the US midterm elections, capital rotated from semiconductor and other artificial intelligence (AI) infrastructure stocks to other sectors. Nadege Dufosse, Head of Multi-Asset at Candriam, pointed out that this capital rotation was based on assumptions of slowing AI capital expenditure, increased opportunities for resolving conflicts in the Middle East, and falling energy prices.

NVIDIA shares slid 9.3% at the close. According to Bloomberg, Micron Tech's $4.5 billion factory in Taiwan halted operations due to labor disputes, causing its share price to drop 17.5%. SK Hynix and Samsung Electronics both fell more than 7% in South Korea, with SK Hynix's American Depositary Receipts (ADR) dropping another 13.4%. After the combined market value of Elon Musk's Tesla and SpaceX evaporated by $130 billion on Wednesday, their share prices fell another 10.8% and 9.1% respectively on Thursday.

At the US market close, the Dow Jones slipped 1,833 points or 3.44% to 51,523; the S&P 500 fell 4.36%, and the Nasdaq dropped 5.52%. European stocks showed mixed performance. Amid unwinding of AI trades, the pan-European Stoxx 600 index closed down 0.38%, with the technology sector sliding more than 3%; French stocks rose slightly by 0.34%, while British and German stocks both fell 0.43%.

The US is scheduled to release its October employment report on Friday. In a speech, Cleveland Federal Reserve President Beth Hammack pointed out that interest rates need to remain at restrictive levels to bring inflation back to target, and more frequent rate hikes would help reduce the risk of policy lag.