Nasdaq enters correction after falling more than 10% from October record high

Key Facts

The Nasdaq Composite confirmed it had entered correction territory on Thursday, November 5, after falling nearly 4% to 24,712.60 points, more than 10% below its record close of 27,599.89 points set on October 6, according to Reuters. A 10% decline from the latest record closing level is widely used to define a correction. The drop came amid a sell-off that swept Wall Street, led by shares of companies tied to building AI data centers, according to the Associated Press. The outlet said the election results raised the prospect of a government halt to further data-center construction. In the same session, Nvidia shares fell 9.3%, the biggest single drag on the S&P 500.

Pressure spread to major technology stocks as investors increasingly questioned when AI spending would translate into profits. Reuters said October results from Alphabet and Meta did not dispel concerns about returns on that spending. Questions also grew about how quickly investments would translate into profits, while borrowing costs remained high. The Nasdaq lost more than $2.5 trillion in market value during October, according to Reuters. The agency said the month's losses reflected investors reassessing the AI infrastructure spending boom.

The correction followed a sharp drop in the session, but chip stocks regained some strength on Friday, November 6. Nvidia shares rose 2.8% that day after falling 9.3% and 3.2% in two previous sessions during the week, according to the Associated Press. Still, the Nasdaq ended the week through November 6 down 3.4%, the outlet said. The rebound marked a move in the session after the sell-off, while the index remained below its record high set in October.

U.S. October labor-market data prompted debate over the course of monetary policy, with nonfarm payrolls rising by 165,000, above the average monthly gain of 48,000 over the previous twelve months. The unemployment rate was 4.1%, according to the Bureau of Labor Statistics. Reuters said traders increased their bets on the possibility that the Federal Reserve would raise interest rates in December after the jobs data were released. Those bets add another factor to investors' assessment of growth stocks and data-center spending. Investors are awaiting the release of U.S. October inflation data.

The Bureau of Labor Statistics scheduled the release of the October Consumer Price Index for November 10 at 08:30 a.m. Eastern Time. The inflation data provide a forthcoming milestone for investors as concerns about returns on AI spending intersect with interest-rate expectations. The Federal Reserve also lists the release of minutes from its October 27 and 28 meeting for November 18 at 2:00 p.m. Eastern Time. The minutes offer insight into discussions at the previous meeting, while stocks tied to data-center construction and chips remain at the center of the recent sell-off and recovery. The November 7 session fell on a Saturday, and the evidence did not report documented market trading activity that day.