Stock market meltdown as $2trillion is wiped out in Wall Street bloodbath after Democrats’ midterms victory rally turns to financial carnage
Stock markets are melting down just a day after the blue tsunami drowned the Congressional Republicans in the midterm elections and stocks related to the artificial intelligence trade plunged deep into the red.
Particularly hard-hit have been tech companies supplying data centers and the microchips that power them.
Shares of chip manufacturers Nvidia and Broadcom had both lost more than 9 percent in the first hours of trading this morning – while Qualcomm bottomed out with a 14 percent drop.
The iShares Semiconductor exchange-traded fund SOXX dropped 11 percent, marking its biggest intraday loss since the start of the Covid-19 pandemic in March 2020.
The tech-heavy Nasdaq Composite fell nearly 5 percent, putting it firmly in correction territory after the gradual declines seen over the last four weeks. The benchmark S&P 500 was down 3.6 percent as of midday.
According to eToro analyst Jakub Rochlitz, the most obvious catalyst for the selloff is markets pricing in the midterm results.
‘But the first domino to fall was Anthropic’s and OpenAI’s growth numbers, which failed to impress investors at the beginning of October,’ Rochlitz told the Daily Mail.
‘That made the market more sensitive to negative news, which has piled up in recent days.’
The tech-heavy Nasdaq Composite fell nearly 5 percent, putting it firmly in correction territory after the gradual declines seen over the last four weeks. The benchmark S&P 500 was down 3.6 percent as of midday.
‘The midterm election result didn’t really create a new fear, it was just the gust of wind that pushed over the house of cards that was already getting shaky,’ former Goldman Sachs analyst told the Daily Mail.
The huge selloff is also being helped along by the sky-high amount of leverage – or borrowed money – among investors.
By some indicators, markets are trading at a level of speculation not seen since the dot-com bubble: Money borrowed to finance investing – so-called ‘margin debt’ – hit a record $1.5 trillion in June, up roughly 50 percent from a year earlier.
According to Fed data, U.S. households hold a record 48 percent of their financial assets in stocks – at the peak of the dot-com bubble, that figure was 38.7 percent.
‘What the markets were missing was a spark to start the selloff. It seems that the mix of the election result and some disappointing tech earnings results was enough to tip markets over the edge,’ Rochlitz told us.
