Yesterday:
The sell-off swept 428 of the 503 stocks in the constituent screen lower against 75 gainers; 109 fell at least 5% and 39 fell at least 10%.
The damage concentrated in artificial-intelligence hardware: Lumentum (LITE) fell 18.6%, Advanced Micro Devices (AMD) 17.6%, Lam Research (LRCX) 16.5%, Marvell Technology (MRVL) 16.4%, Ciena (CIEN) 15.3%, Teradyne (TER) 15.3%, Dell Technologies (DELL) 14.9%, Vertiv (VRT) 14.0%, Microchip Technology (MCHP) 13.9%, Flex (FLEX) 13.6%, Applied Materials (AMAT) 13.5%, KLA (KLAC) 13.4%, Coherent (COHR) 13.0%, Corning (GLW) 12.9%, Quanta Services (PWR) 12.3%, Hewlett Packard Enterprise (HPE) 11.9%, ON Semiconductor (ON) 11.6%, Comfort Systems USA (FIX) 11.6%, Analog Devices (ADI) 11.2%, Broadcom (AVGO) 10.4% and Nvidia (NVDA) 9.1%. Tesla (TSLA) fell 10.8%.
Memory-chip makers took the heaviest losses: SanDisk (SNDK) fell 22.2%, Western Digital (WDC) 17.4%, Micron Technology (MU) 17.2% and Seagate Technology (STX) 16.3%, as the industry’s shortages rippled through customers’ production plans, Investor’s Business Daily reported; Qualcomm (QCOM) fell 9.5% after saying the memory shortage is hurting sales of its smartphone chips. Power and construction names tied to the data-center build-out fell with it: Bloom Energy (BE) lost 16.4% and Everpure (P) fell 16.4%. (rockandturner@substack.com)
From Ed Yardeni at yesterday’s close:
Politics Shakes Up the Markets
The WSJ Editorial Board:
(…) On Wednesday investors bid up stocks on seeming hope that political gridlock in Washington might be good for the economy. On Thursday they noticed Democratic control of so many state governments, and towering majorities in Congress, might not be great for business, especially tech. Investors have to figure out where to land after such a seismic election with uncertain policy consequences.
Notably, Thursday’s selloff spread beyond tech, marking the first time in months that every sector represented in the S&P 500 index declined. And steeply so, this time. Consumer stocks that previously became a refuge for investors taking tech-stock profits also fell.
This could mark merely another painful step in the repricing of financial risks. Or it could signal a new degree of liquidity stress in the market as investors sell to take profits and raise cash to hedge against what they see as new political and economic risks.
None of this is a counsel of panic, especially given tech stocks’ propensity for volatility. But it’s a warning to Washington: While many corners of the American economy have performed well lately, a wealth effect from steadily rising asset prices has been a cornerstone of consumer spending.
A sustained tech or stock-market correction, if one comes, could leave Washington searching for other ways to bolster economic growth.
Republicans may think they can spend the next two years fighting over the Iran war. Democrats hope to use their time passing big entitlement legislation such as Medicare for All, raising taxes, and investigating President Trump. They’re both on notice that sometimes market events have other ideas.
Ed Yardeni:
We view the political backlash as another constraint on AI investment, alongside financial and physical bottlenecks. But these are speed bumps, not roadblocks, even though Wall Street seems to be pricing in the latter. We think that’s overdone.
As AI adoption broadens and productivity gains accelerate, demand for compute will keep growing. Data centers will get built, albeit at a slower pace. Speed bumps should prevent the AI boom from moving too fast and crashing around the next curve.
Iran is Reviewing ‘Concrete Proposals’ on Nuclear Program, Officials Say
Iran is reviewing a set of proposals presented by mediators that could shape the future of its nuclear program, according to five officials briefed on the negotiations, representing a potential breakthrough in stalled diplomatic efforts to end its war with the United States.
Iran’s willingness to re-engage in nuclear talks, after weeks of refusing to budge, suggests recent mediation efforts led by Qatar to prevent a return to full-blown war have had some success, the officials said. They described the terms being reviewed as “concrete proposals,” without elaborating. (…)
Mr. Rezaei suggested in a televised address on Saturday that Iran would not hold nuclear talks until the United States accepted the country’s demands. Those include releasing frozen Iranian assets, and lifting sanctions on the country’s oil and the U.S. naval blockade on Iran’s ports.
Privately, however, Mr. Rezaei has shown more openness to discussing the nuclear issue, according to the two Iranian officials and the American official. He has been negotiating with the Qataris alongside senior Iranian officials, including Abbas Araghchi, the foreign minister, and Mohammad Bagher Ghalibaf, the speaker of Iran’s Parliament.
The future of Iran’s stockpile of highly enriched uranium has been one of the key sticking points in the talks. (…)
Iranian officials have been adamant that they will not ship the uranium outside the country. In previous rounds of talks, Iran has discussed diluting the stockpile on its own soil under the supervision of international inspectors. (…)
As of Thursday morning, Iran and the United States were reviewing the latest suggestions from mediators to bridge any remaining gaps, two of the officials said. (…)
“From the perspective of the U.A.E., and I would also say Gulf countries, we don’t really want to see another round of confrontation in the region,” said Anwar Gargash, a diplomatic adviser to the president of the United Arab Emirates, at the Manama Dialogue security conference in Bahrain over the weekend. “We want to see a diplomatic and political resolution of this protracted crisis.”
Iran has exempted ships from India, China, Iraq and Qatar from its Strait of Hormuz restrictions, a senior Iranian lawmaker said on Tuesday.
“Ships from these countries pass freely, and the Americans do not intercept them either,” Amir Hayat Moqaddam, deputy chairman of the Iranian parliament’s National Security and Foreign Policy Committee, told the Iranian Students’ News Agency (ISNA). (…)
What does Iran get in return for letting ships pass?
It will receive medicine from India and political backing from China, according to Hayat Moqaddam. Iran already receives diplomatic support from Qatar, which is leading mediation efforts to end the US-Israel war on Iran.
Hayat Moqaddam said Tehran will also collect transit fees from Indian and Chinese ships, while Qatari vessels pass free. He did not say whether Iraqi ships will pay a toll.
“If successful, this move will generate significant revenue for Iran, as China is by far the largest purchaser of Iranian crude oil, buying nearly 90 percent of Iran’s total oil exports,” he said.
By including Qatar, with its many liquefied natural gas (LNG) buyers, and India, Iran is also “trying to undermine acceptance” of Washington’s strategy in the conflict, especially as it charges Qatar no tolls, he added. (…)
Of the 10.23 million barrels a day of Gulf crude that passed through the strait in October, about 42 percent went to China and 13 percent to India, Muyu Xu, a senior crude oil analyst at the analytics firm Kpler, told Al Jazeera. (…)
US Labor Productivity Increases at Fastest Pace in a Year
Productivity, or nonfarm business output per hour, increased at a 3.6% annualized rate after an upwardly revised 2.1% pace in the prior quarter, data from the Bureau of Labor Statistics showed Thursday.
Unit labor costs — what businesses pay employees to produce one unit of output — fell 0.7%, the first decline since the second quarter of 2025. (…)
Hours worked rose 0.1%, while hourly compensation, unadjusted for inflation, increased an annualized 2.9%. After adjusting for inflation, worker compensation rose 1.1%.
The labor share of income, the portion of output that goes to workers in the form of compensation, was 53% in the third quarter of 2026, the lowest level in data back to 1947.
Separate figures out Thursday from Challenger, Gray & Christmas showed layoff announcements were the lowest for any October in three years.
The four-week average of initial applications for unemployment insurance benefits fell to 194,700, the lowest since 1969, according to the Labor Department today. For just the week through Saturday, initial applications for unemployment benefits fell to 189,000, same as in mid-July, and both were the lowest since 1969.
But the population, the labor force, and employment are vastly bigger now than in the 1960s. So these initial applications, historically low in absolute terms, are amazingly low in relative terms. (…)
Zillow October Market Report
Existing home sales fell 8.7% year over year, though that largely reflects sales agreed to in September, when mortgage rates were below 7% for much of the month. Newly pending listings, a leading indicator for the next month’s closed sales, fell 16.8% from last October, marking the biggest annual dip since August 2023 and slowest October since 2018.
November is shaping up to have an even larger contraction in sales activity (…).
A jump in housing costs likely drove the slowdown. The monthly mortgage payment on the typical U.S. home was an estimated $2,004 in October, assuming a 20% down payment and excluding taxes and insurance. That’s up 12.8% from last year and 4.8% higher than in September, the biggest one-month jump in four years. (…)
The rise in mortgage costs is almost exclusively due to higher mortgage rates. The typical U.S. home value fell 0.6% month over month and is just 0.7% higher than a year earlier, as measured by the Zillow Home Value Index. (…)
The typical U.S. rent is up 2.9% year over year, according to the Zillow Observed Rent Index. That’s the strongest annual gain in the past 19 months, and marks the seventh consecutive month that annual rent growth has increased. (…)
- Active inventory was 3.4% higher than a year earlier.
- New for-sale listings totaled 328,328 in October, down 4.2% from a year earlier and down 4.4% from September.
- Rents are expected to grow 2.4% in multifamily and 3.2% in single-family in the fourth quarter.
AI Companies Scramble to Navigate a World Hostile to Data Centers
(…) Overnight, they found themselves facing the prospect of blanket moratoriums, tighter environmental regulations and longer review timelines, along with potential new AI-safety regulations that could further bog them down.
The tech investor Brad Gerstner said on the “All-In” podcast that as much as 35% of the U.S. data-center construction planned for next year is now at risk.
Executives in charge of government relations for so-called hyperscaler companies moved quickly to open lines of communication with incoming governors and their transition teams, seeking an understanding of how their campaign-trail rhetoric would translate into policy actions.
Dina Powell McCormick, who as president of Meta Platforms oversees its AI-infrastructure operations, said at the WSJ Tech conference Wednesday night that the company had already found one incoming governor prepared to parley.
“We did have a governor that won last night who did make data centers a big part of their platform say, ‘As soon as we get past the inauguration, let’s meet, because we don’t want to lose this investment in our town. We don’t want these jobs to go elsewhere,’ ” she said.
But on the whole, Powell McCormick said, Meta assumes that building data centers in the U.S. is “going to be harder” and getting new ones done from scratch will be “very challenging.”
She said Meta and other tech companies are increasingly considering building new data centers outside the U.S. as one way around the new hurdles. Another avenue, she said, is to scale up existing data centers, where surrounding communities that have seen benefits in the form of job creation and tax revenue don’t require as much persuasion. (…)
Anthropic said it was pursuing projects in several “non-U.S. jurisdictions” as part of a plan to “reduce concentration risks associated with operating a significant portion of our compute infrastructure in the United States.” (…)
(…) Dan Diorio, executive vice president of state policy and government affairs for the Data Center Coalition, an industry alliance, said communities that prohibit data centers risk seeing investment, jobs and tax revenue move elsewhere.
“That’s going to go to other communities that have not shut themselves off,” Diorio said, “or to states that have not shut themselves off.” (…)
Tuesday’s results stand to shrink the $1.4 trillion that technology companies were expected to spend on AI infrastructure by roughly 5% to 7% in 2027, according to Bloomberg Intelligence technology analyst Mandeep Singh. That includes spending on chips, networking equipment, land and other materials for data center construction.
Those cuts and the anticipated slowdown in approvals may translate into as many as 10 gigawatts of data center capacity failing to come online next year as planned, Singh said. (…)
Nearly three in four Americans now oppose a data center in their community, up from about two-thirds in March, according to a September Quinnipiac poll. An October poll from Ohio Northern University found that 57% of respondents in the state would vote “yes” on a total ban on large-scale data centers.
Nearly half of the country’s 46 ballot measures to restrict data center construction were in Ohio and nearly all of them passed easily. Some rejected specific projects, such as EdgeConneX’s complex in Ashville, or required financial guarantees, while others set limits on data center power and water use; some 11 Ohio towns passed total or near-bans. (…)
Ahead of the election, [Ohio Governor-elect Amy] Acton’s stump mantra was: “Ohio is open for business, but we are not up for sale.” (…)
“We expect to see a lot more sand in the gears of the AI build-out regardless — with more time required to secure permits and other approvals, as well as more concessions that data center developers will have to make,” said Libby Cantrill, PIMCO’s head of public policy.
Incoming governors in Iowa and Nevada pledged to stop AI tax breaks. Byron Donalds, the next governor of Florida, has promised a measure that would require data centers to source their own electricity, rather than plugging into the grid. (…)
Texas Governor-elect Gina Hinojosa was interviewed after the market closed on CNN and said, “All currently permitted data centers in Texas will be allowed to finish construction.” This essentially covers all of 2027 and likely most of 2028.
IRAN
Trump met with his national security advisers to discuss Iran on Thursday as part of his weekly intelligence meeting, Axios reported, citing two unnamed US officials. He is considering three options: continuing efforts to hobble Tehran economically, or cutting a deal that includes significant concessions to the Iranians, according to the report.