Tech Stocks Rally as Nasdaq Enters Correction Ahead of Midterms
US tech stocks rebounded on Tuesday, pushing the Nasdaq higher even as the index officially entered a correction zone. Apple shares fell after warning of rising memory chip costs, while chipmakers like Nvidia and AMD gained. Markets await midterm election results, with analysts viewing the event as a potential catalyst for future gains despite near-term volatility.
Key points
- The Nasdaq Composite rose 0.79% to 25,361.31, while the S&P 500 gained 0.40% to 7,571.81; the Dow fell 0.45%.
- The Nasdaq-100 is more than 10% below its all-time high, confirming a market correction as investors question AI return on investment.
- Apple shares dropped 2.2% after the company warned that rising memory chip costs would pressure holiday-quarter gross margins.
- Chip stocks led gains, with Nvidia up 3% and AMD up 5.1%, while the Philadelphia chips index jumped 3%.
- Software stocks declined, with Gartner falling 13.2% and Thomson Reuters and Shopify dropping around 7% after earnings reports.
- Brent crude fell over 1%, extending recent declines, which provided support for broader market sentiment.
Background
US markets reached record highs in early October 2026, driven by tech strength but narrow breadth. Since then, the Nasdaq has experienced significant volatility, including a sharp sell-off in AI stocks in late October. The current correction follows a period where the S&P 500 peaked at 7,818.93, with concerns growing over the sustainability of massive AI capital expenditures.
How outlets are covering it
Reuters emphasizes the technical entry into a correction for the Nasdaq-100 and the specific impact of Apple's margin warnings. AP News highlights the global ripple effect, noting that South Korea and Taiwan markets fell to three-month lows due to tech weakness, while Australia raised interest rates to 4.85% citing AI-driven inflation. Business Insider focuses on the forward-looking catalysts, noting that while the midterms are a hurdle, historical data suggests the S&P 500 gains an average of 14% in the six months following midterms. J.P. Morgan analysts view potential dips from geopolitical tensions as buying opportunities, while Morgan Stanley suggests the current correction is in its 'final innings'.
Why it matters
The official entry of the Nasdaq into a correction signals a shift in investor sentiment regarding the profitability of AI investments. The midterm elections will determine the political landscape for fiscal policy and regulation, potentially influencing future market volatility. Additionally, the divergence between tech and non-tech sectors, along with global reactions in Asia, indicates that the AI trade remains a primary driver of market instability.
What to watch
Investors will closely watch the results of the US midterm elections, with polls favoring Democrats for the House. The October jobs report is also expected to influence Federal Reserve interest rate decisions, with a 78% probability of a 25 basis point hike at the next meeting. Market participants will monitor whether the correction continues or if the post-midterm period triggers a historical rally.
- S&P 500, Nasdaq rise as tech stocks gain ahead of midterm results Yahoo Finance
- Stock market today: Dow, S&P 500, Nasdaq waver ahead of midterm election results, AMD earnings Yahoo Finance
- Stock Market Today: Dow Opens Lower; Apple Stock Falls After Earnings Disappoint WSJ
- Nvidia and other Big Tech stocks lift Wall Street and make up for a drop by Apple AP News
- Stock market to be jolted by Apple earnings, midterms, and October jobs report this week Business Insider
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