Wall Street endured another turbulent week, with the combined market capitalization of the three major U.S. stock indexes falling by about $4.1 trillion.
The market panic stems from Democrats taking control of both chambers of Congress after the U.S. midterm elections. Investors fear tighter regulation of the artificial intelligence (AI) industry and slower approvals for data center construction, triggering a concentrated sell-off in tech stocks. Treasury yields surged after the latest nonfarm payrolls report, further fueling bets that the Federal Reserve will raise rates in December.
Next week, U.S. stocks may continue trying to recover from the growth-stock panic, while geopolitical risks such as tensions in the Middle East and expectations for Federal Reserve policy are likely to continue roiling markets.

Expectations for a December Fed rate hike rise
This week's nonfarm payrolls report showed some improvement in U.S. employment, bolstering expectations that the Federal Reserve will raise rates further. According to a U.S. Department of Labor report, nonfarm payrolls rose by 165k in October, far above the market consensus of 65k. September's figure was revised up to 60k and August's to 186k, for a net upward revision of 84k jobs.
The unemployment rate fell from 4.2% in September to 4.1% in October, the labor force participation rate rose from 61.8% to 61.9%, and hourly wages increased 0.4%, above expectations of 0.3% and September's 0.3% increase.
Matthew Martin, senior U.S. economist at Oxford Economics, wrote in an email to Yicai that “strong growth in nonfarm payrolls, upward revisions to previous growth, and a falling unemployment rate all underscore a gradual tightening in labor market conditions. This allows the (Federal Reserve) to focus on inflation.”
Federal funds futures pricing on Friday (the 6th), local time, showed a 77% probability that the Federal Reserve would raise its target federal funds rate by 25 basis points in December, up from 67% on Thursday.
“We do not think month-to-month data fluctuations are driving policy decisions,” said Thomas Simons, chief U.S. economist at Jefferies, in a report. “That said, together with the longer-term trend in inflation, these data suggest a December rate hike is all but certain.”
Martin expects the upcoming October core inflation reading to rise again, meaning the economic data will justify policymakers' recent calls for another rate hike at the December meeting. “However, since most of the inflation overshoot reflects pressures from (artificial intelligence) and spillover effects from rising energy prices, tech stocks and global oil prices have recently fallen sharply on expectations of tighter regulation and progress in negotiations, respectively, reducing the likelihood of further rate hikes in 2027,” he wrote.

When will markets stabilize?
U.S. stocks fell across the board over the past week, with the Nasdaq and S&P 500 posting four consecutive weekly declines. The S&P also recorded its biggest weekly drop since April last year.
Sector performance was mixed, with Dow Jones market data showing energy down 12%, technology down 6.9%, and industrials down 2.8%. Utilities, materials, and healthcare also declined. Consumer discretionary rose 2.7%, communication services gained 2.3%, real estate advanced 1.9%, and financials and consumer staples also moved higher.
As concerns grew over excessive spending by AI companies, the Nasdaq plunged more than 5% on Thursday, reflecting fears that stronger opposition to AI from Democrats and across the U.S. would slow data center construction.
In a report, Saxo Bank Investment and Options Strategist Coen Hurelbeke said a Democrat-controlled Congress could subject technology and AI spending to closer scrutiny.
Bearish sentiment toward the AI trade had been building even before the election. The Nasdaq posted its worst monthly performance since March 2025 in October, led lower by chipmakers and emerging cloud service providers.
The prevailing Wall Street consensus for U.S. stocks next week is that volatility will remain high and key data will set the direction, with fierce short-term battles between bulls and bears. The main divide is between the impact of AI regulation and a rebound as positions recover.
The U.S. Consumer Price Index (CPI) for October, due out on Tuesday local time, is the biggest swing factor. If inflation rebounds more than expected, the probability of a December Fed rate hike will rise further. Concerns that AI data center construction will slow after the Democrats' big win have not yet fully dissipated, and pressure on tech stocks may return.
JPMorgan is tactically bullish, arguing that after hedge funds deleveraged and concentrated AI positions were liquidated in October, market conditions have become more favorable. It recommends a barbell strategy combining tech and cyclical stocks, and, based on historical data, is betting on a broad rally after the election results.
HSBC sees Anthropic's initial public offering (IPO) as the true market catalyst. If the deal goes through smoothly, the market will return to tech stocks across the board while shedding non-core assets that surged in October.
Citadel Securities expects the path of least resistance for U.S. stocks at year-end to be higher. Systematic funds' positioning has fallen to its lowest level since March, while retail investors have been net buyers for 22 consecutive trading days, purchasing nearly $33 billion, leaving ample capital to drive a recovery.#WCTCS9 #广场交易达人

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