US Today.zip Nov 5: Nasdaq Falls 5.5%, Chip Index Plunges 12%

Wall Street had its worst day in more than a year on Thursday, November 5. The Nasdaq Composite fell 5.52%, the S&P 500 dropped 4.36% and the Dow Jones Industrial Average lost 3.44%. The Philadelphia Semiconductor Index plunged 12.25%, its biggest one-day decline since March 2020. The selloff erased the gains from the day before, when stocks had rallied after Democrats won the midterm elections. Here is what happened, what the numbers mean and what to watch next.

Stocks: all three major indexes slide

The Dow closed at 51,523.06, down 1,833.06 points or 3.44%. The S&P 500 finished at 7,353.73, down 4.36%, and the Nasdaq closed at 24,315.00, down 5.52%. The day before, the Dow had ended at 53,356.12 after a post-election surge, so the Dow gave back more than the entire jump in a single session. Reports said all 30 Dow components fell, and Costco, up 1.83%, was the only stock among the S&P 500's 50 largest companies to rise.

Our own calculation shows the Nasdaq now sits about 12.3% below its 52-week high of 27,722.75. Reports described the S&P 500's drop as its largest since the tariff selloff of April last year.

A 52-week high is the highest price an index or stock has reached in the past year. Measuring how far the market sits below it is a quick way to gauge how deep a pullback has become.

Chips: the AI trade unravels

The Philadelphia Semiconductor Index closed at 9,011.14. All 30 of its members fell. Nvidia dropped 9.26%, which cut its market value to about $4.38 trillion. Micron Technology and AMD each fell roughly 17%, while Broadcom, Intel and the US-listed shares of TSMC lost around 10% or more, according to reports. SK hynix's US depositary receipts fell 13.40%.

Reports said there was no new company news behind the move. Instead, investors appeared to be repricing anything tied to artificial intelligence after Democrats' election win, fearing tougher rules on AI and data centers. Senator Bernie Sanders called for a national ban on new data center construction, according to reports.

The index tracks 30 chip companies listed in the United States. The size of the decline shows how broadly the selloff hit semiconductor stocks.

Rates: yields fall, hike odds ease

As stocks sold off, investors bought Treasuries. The 10-year yield fell 5.6 basis points to 4.836% as of 3 p.m. New York time, and the 2-year yield dropped 10.4 basis points to 4.477%. The 10-year briefly touched 4.814%, its lowest level since September 9, according to reports.

Fed funds futures now price a 68.7% chance that the Federal Reserve raises rates in December, down from 82.7% a day earlier. The Cboe Volatility Index, known as the VIX, jumped 69.66% to 28.18. The Bank of England raised its policy rate by 0.25 percentage point to 4.00%, and Governor Andrew Bailey said further increases are possible if the Middle East conflict is not resolved, according to reports.

One basis point is 0.01 percentage point. The VIX measures expected swings in the S&P 500 over the next 30 days, so a higher reading signals greater fear.

Jobs: claims near a 57-year low

Initial jobless claims for the week ended October 31 fell by 6,000 to 189,000, below the forecast of 196,000. That matches the level reached in the third week of July, which was the lowest in 57 years. Third-quarter nonfarm productivity rose at a 3.6% annual rate, the best reading in a year, and Challenger, Gray & Christmas reported October layoff plans of 43,994, down 71% from a year earlier.

The labor market is still solid even as stocks tumble. That matters because strong jobs data can keep the Fed focused on inflation rather than growth, which is why traders watch these reports so closely.

Oil: a one-day rebound

West Texas Intermediate rose 2.72% to $90.52 a barrel and Brent gained 3.88% to $98.29. Both benchmarks had fallen more than 8% the day before. UK maritime authorities said at least five ships in the Gulf have reported attacks or other incidents since November 2.

Forecasts point in opposite directions. JPMorgan estimates global supply will exceed demand by 1.4 million barrels a day this month, while Eurasia Group says Brent could reach $110 to $125 if the conflict escalates. Both are forecasts, not outcomes, so the Middle East remains the main swing factor for crude.

What to watch next

The next big event is the US October jobs report, due at 8:30 a.m. New York time on Friday, which is 22:30 in Korea. Investors will also watch the University of Michigan consumer sentiment index and remarks from Fed Vice Chair Bowman. A strong jobs number could revive hike expectations, while a weak one could push them lower. Either way, the question is whether stocks and yields keep moving together.

The bottom line

The Nasdaq fell 5.52% and the chip index 12.25% on November 5, while Nvidia lost 9.26%. Treasury yields dropped, the odds of a December Fed hike eased to 68.7%, jobless claims held near a 57-year low and oil bounced back. Friday's jobs report will test whether the market's fears are overdone.

Sources: US Department of Labor, Challenger, Gray & Christmas, UK Maritime Trade Operations