US stocks face a volatile week as investors brace for October CPI inflation data and key tech earnings following a sharp AI-led selloff. The Nasdaq Composite closed Thursday nearly 12% below its October 6 record high. Many tech shares fell, though the S&P 500 still showed gains for 2026 overall.
Synopsis
US stocks face a volatile week as investors brace for October CPI inflation data and key tech earnings following a sharp AI-led selloff. Regulatory concerns post-US midterms, alongside Fed rate hike expectations, have pushed the Nasdaq into correction territory despite the S&P 500 maintaining gains for 2026.
US stocks are heading into this week on shaky ground after a sharp selloff in artificial intelligence-related shares unsettled investors, raising concerns about the sustainability of one of the market's biggest drivers of gains this year. Investors are bracing for fresh tests, including the release of key inflation data and earnings reports from major technology companies, Reuters reported.
The Nasdaq Composite closed Thursday nearly 12% below its October 6 record high, breaching the 10% threshold that signals a market correction. The decline followed heavy selling in technology and semiconductor stocks, reversing gains recorded immediately after Tuesday's US midterm elections.
S&P 500 Top Gainers
Airbnb189.99(11.67%)
Vistra124.80(10.55%)
AppLovin391.22(9.86%)
S&P 500 Top Losers
Axon Enterprise313.00(-18.18%)
Microchip Technology58.35(-10.02%)
Coterra Energy32.56(-8.62%)
Charter Communications118.07(-6.19%)
Democrats secured control of Congress in the elections, defeating President Donald Trump's Republicans and winning several key gubernatorial races in states with significant data-centre activity. Concerns that increased political and regulatory scrutiny could slow the expansion of AI infrastructure have added to investor anxiety surrounding the sector, according to Reuters.
Technology stocks staged a modest recovery on Friday, but major US equity indexes still ended the week lower.
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The selloff on Thursday was broad-based, with all 11 S&P 500 sectors ending in negative territory. However, technology and AI-related shares bore the brunt of the pressure. The S&P 500 technology sector plunged 7.3%, while the Philadelphia Semiconductor Index tumbled more than 12%. Both recorded their steepest single-day declines in more than six years, Reuters reported.
Market volatility also spiked, with the Cboe Volatility Index climbing to a seven-month high on Thursday.
Despite the recent turbulence, the major US benchmarks remain in positive territory for 2026, with the S&P 500 up nearly 8% for the year.
US CPI data in focus as Fed rate expectations shift
Investors will closely track Tuesday's release of the US consumer price index (CPI) for October, which could influence expectations surrounding the Federal Reserve's monetary policy trajectory.
The inflation report comes amid growing expectations that the central bank will raise interest rates in December to contain price pressures. The Fed held rates steady at its previous meeting after delivering its first rate increase in three years in September.
Market participants marginally reduced their expectations of a December rate hike during Thursday's equity selloff. However, a stronger-than-expected jobs report on Friday reinforced expectations of further monetary tightening.
Fed funds futures were indicating an approximately 80% probability of a rate increase at the central bank's December 8-9 meeting, according to LSEG data cited by Reuters.
Beyond the immediate policy decision, investors will look to the inflation figures for clues about the Fed's interest rate trajectory into 2027. Markets are currently pricing in approximately two additional standard 25-basis-point increases during the current tightening cycle.
A hotter-than-expected inflation reading could intensify concerns about further monetary tightening, adding another layer of uncertainty for equity markets already grappling with technology-sector weakness.
AI stocks face earnings test
Corporate earnings will also remain in focus this week, particularly results from companies closely linked to the artificial intelligence infrastructure boom.
Cloud computing company CoreWeave, semiconductor equipment maker Applied Materials and networking technology company Cisco Systems are among the companies scheduled to report earnings, Reuters reported.
CoreWeave's results could be particularly significant as investors assess the financing requirements and commercial viability of the massive investments being made in AI infrastructure. Its shares have come under heavy pressure in recent weeks amid concerns about funding the expansion of data centres.
Investors will look for indications that AI-related projects remain on track and that companies can secure the financing required to complete planned investments.
The recent underperformance of technology stocks has also highlighted the extent of the shift in market sentiment. According to Truist Advisory Services Chief Investment Officer Keith Lerner, the technology sector's underperformance relative to the S&P 500 over the past month was the largest since May 2002, Reuters reported.
The combination of political uncertainty, regulatory concerns, elevated interest rate expectations and questions surrounding AI investment returns has left investors increasingly cautious.
With inflation data and technology earnings approaching, the coming week could prove crucial in determining whether the recent selloff represents a temporary correction in the AI trade or signals a more prolonged shift away from the sector.
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