US Markets Face Volatility Amid CPI Data and Tech Earnings

Midterm election results spark AI regulatory fears

Stocks declined on Thursday due to investor concerns that Democratic victories in the US midterm elections would hinder the expansion of AI data centres. In Tuesday's midterm elections, Democrats won control of the US Congress after routing President Donald Trump's Republican party.

The rally following the midterm elections lasted only one day. Democratic victories in Congress and key gubernatorial races have created concerns regarding potential permitting delays, restrictions, and stricter state-level rules that could hinder data-centre construction for AI.

Democrats secured several key governors' races in states with high concentrations of data centres, such as Texas. Public opposition regarding environmental and other issues related to the proliferation of data centres was a prominent topic during the midterm elections.

The main risk to artificial intelligence development is state-level restrictions on data centres, which account for about 45% of planned capacity. FX Empire advises that its website contains information about cryptocurrencies and contracts for difference, which are complex instruments with a high risk of losing money.

Tech sector sell-off and historical underperformance

On Thursday, the technology sector experienced a significant decline, with the S&P 500 tech sector falling 7.3%. The Philadelphia SE Semiconductor index dropped more than 12% on the same day, which represented its largest one-day loss in more than six years.

The chip index, known as the SOX, fell 12.25% on Thursday, marking its worst daily performance since March 2020. Tech stocks lost approximately $2.3 trillion in value during this session.

Federal Reserve rate hike expectations

Traders are currently monitoring upcoming consumer price index and producer price index data to determine if they support the case for an interest rate hike in December.

This follows the October jobs report, which showed payrolls increased by 165,000 and the unemployment rate decreased to 4.1%. Following this data, fed-funds futures indicated an approximately 80% probability of a rate hike in December.

LSEG data also indicates an approximately 80% probability that the Federal Reserve will raise rates at the 8–9 December meeting. The Federal Reserve maintained steady rates last month, following a rate hike in September that was the first in three years.

Investors currently expect approximately two additional 25-basis-point rate increases in total for the current cycle.

Key earnings reports for CoreWeave, Cisco, and others

Investors are focused on whether AI-linked companies can support their current capital-spending outlooks. Tech companies scheduled to report earnings next week include CoreWeave, Applied Materials, and Cisco Systems.

Rocket Lab is scheduled to report earnings on Monday, and LITE is also set to report. Analysts forecast CoreWeave will report $3.5 billion in revenue, compared to $1.4 billion the previous year, with an expected loss of $1.55 per share.

Wall Street expects Cisco Systems to report $18.1 billion in revenue and earnings of $1.32 per share. Investors are monitoring Cisco Systems following a downgrade by Morgan Stanley from Overweight to Equal Weight.

In late October 2026, Integra LifeSciences Holdings Corporation had its price target lowered by UBS to 14.0, Truist Securities to 13.0, Citigroup to 14.0, and BMO Capital to 14.0. The US government is scheduled to release the monthly consumer price index report on Tuesday.

S&P 500 support levels and technical indicators

The 200-day moving average of the S&P 500, set at 7,325, is viewed as a key threshold for gauging short-term market direction. On Thursday, the S&P 500 fell 4.4% to 7,354, moving through the 7,490 level.

The technology sector ETF (XLK) closed at $164.74, below its $169 trigger. Although the S&P 500 index is technically oversold, it still trades above its 200-day moving average.

Thursday’s close was 3.1 standard deviations beneath the 20-day average. A clear close below the 7,325 200-day average would indicate further downside and a move toward defensive assets.

Staying above this level would support a sharp correction within a bull market. Technology stocks are described as extremely oversold, and the author expects a rotation back to growth only if the 200-day average holds and semiconductor stocks reverse.

A soft consumer price index print could drive a rebound toward the 50-day average. A hot consumer price index reading, especially after strong payroll data, would raise the odds of a December rate hike and create asymmetric risk for growth stocks.

Market outlook and historical context

Marvin Loh stated, "If you get a hot number and then you start adding additional tightening because the inflationary environment looks like it's accelerating, that's just something else that investors would have to absorb".

Historically, in 23 of the 27 similar cases since 1950 when the S&P 500 fell to comparable levels, the market was higher a month later. All 19 US midterm elections since 1950 have been followed by higher stock markets a year later.