Tech rout shifts trader worries from inflation to growth

A sharp sell-off in technology shares has moved investors' attention from inflation to economic growth. Traders are now asking whether central banks can keep raising interest rates to fight an energy price surge caused by the Iran war, Reuters reported in an analysis published Friday, Nov. 6. The analysis said the rout clouds the outlook for a global economy that has been supported by the AI boom.rmb.reuters.com

A historic Thursday sell-off

On Thursday, Nov. 5, the S&P 500 ↗ 0.31% fell 4.4%, its worst day since the "Liberation Day" tariff shock of April 2025. The Dow Jones Industrial Average lost 1,833 points and the Nasdaq Composite dropped 5.5%, which put it in correction territory, the Associated Press reported. Nvidia ↗ 2.78% fell 9.3%, wiping out its gains for the year. The sell-off followed Democrats' sweep of the midterm elections, which raised fears of closer AI scrutiny and limits on data center construction. Those fears added to existing worries about the cost of building out AI, according to Reuters.arkansasonline.com+1

Trading was mixed on Friday. Early in the session, the Dow was down 0.91% at 51,052.76 while the Nasdaq gained, as bargain hunters bought beaten-down chip stocks, Chosun Ilbo reported. The Nasdaq closed 1.1% higher and the S&P 500 rose 0.3%, while the Dow fell 0.5%. All three indexes ended the week lower, and the Nasdaq lost 3.4% for the week, Investing.com reported. The losses spread to Asia. Japan's Nikkei 225 had its worst week since 2020 and entered bear-market territory, NBC News reported.chosun.com+2

Rate-hike bets cool

Traders now see about a 70% chance that the Federal Reserve raises rates in December, down from more than 80% the week before. Odds of a December rate hike by the European Central Bank fell to about 60% from 75%, Reuters reported. "When you start to impact equity valuations and asset values… the wealth effects that fueled growth or contributed to fueling consumer-led growth go in reverse," said Tim Graf of State Street ↗ 0.20%.rmb.reuters.com

Friday's jobs report made the picture harder to read. U.S. employers added 165,000 jobs in October, far more than the 59,000 economists expected, Chosun Ilbo reported. That raised the chance of a Fed rate hike and limited the stock rebound, NBC News said.nbcnews.com+1

Energy shock still looms

Central banks are still dealing with high energy prices. Euro zone inflation is at a three-year high of 4%, and U.S. inflation has been above the Fed's target for more than five years, according to Reuters. In one downside scenario, the International Monetary Fund estimates that a steep drop in AI investment could cut global GDP by 1.1% by 2028.rmb.reuters.com

"Big worries are colliding," Susannah Streeter of Wealth Club told AFP, noting that a slower data center build-out comes "right at the time that investors have become super nervous about returns on this massive investment."afp.com