US Stock Market May Struggle to Regain October Peak Amid AI Regulation Fears

what happened

According to Market Talk, citing a note from Capital Economics market economist Joe Maher, the US equity market will likely struggle to regain its early October peak for some time, even if fears about the political outlook prove overdone. He says the overnight selloff was triggered by concerns that Democrats in Congress and at the state level will move to regulate the AI industry and restrict data center development. Sentiment toward the AI trade was already fragile and the market showed signs of a late-stage cycle, so this could become the catalyst for a longer unwind of the AI equity boom.

Tech stocks sold off after the midterm elections as investors weighed the prospect of a slowdown in data center construction. Treasury yields fell, with the 10-year down 0.055 percentage point to 4.836% and the two-year down 0.104 point to 4.475%, both near two-month lows. WTI crude remained around $90. Futures markets raised the odds of another hold in December to 35% from 17% a day earlier, leaving a 65% probability of a hike. October payrolls are due tomorrow, and economists surveyed by WSJ expect a gain of 59,000 jobs after 29,000, with unemployment steady at 4.2%.

why it matters

Two factors matter most for markets now: how the debate over AI regulation develops and the jobs data, which could reset expectations for interest rates. Company reports showed mixed reactions, with Affirm shares falling after hours on rising delinquencies, Mattel cutting its full-year outlook, and Airbnb rising about 10%.

market impact

US tech stocks: AI regulation fears pressure the sector; Treasuries: yields fell, so prices rose.

• ▼US tech stocks pressure down — fears of AI regulation and a slowdown in data center construction
• ▲US Treasuries pressure up — yields fell on cautious Fed commentary and rate expectations

instruments