The Nasdaq-100 has fallen 10% from its most recent peak, its third technical correction since the start of the year. Technology sell-offs, midterm election expectations and concerns over AI spending drive the decline, according to the FxPro analyst team.
A fresh wave of technology sell-offs pushed the Nasdaq-100 into its third technical correction of the year, with the index down 10% from its latest peak. Disappointing earnings reports and expectations of a Democratic victory in the midterms triggered the sell-off. The index also recorded its worst monthly performance since March 2025.
Rotation hides the pullback
Morgan Stanley noted that the pullback was already under way beneath the surface while the equity market looked calm. Investors sold technology shares and moved into firms that can capitalise on the strength of the US economy or high oil prices, a move known as rotation.
As a result, the gap between the equally weighted S&P 500 and the standard S&P 500 in October was the widest since April 2009. In earlier sell-offs, the Nasdaq-100 and the equally weighted index moved in the same direction. Morgan Stanley links this correction to the midterm elections, AI spending concerns and a lack of liquidity, yet the bank stays optimistic that the market will rise steadily once those factors run their course.
Midterm and spending risks
Kalshi and Polymarket put the Democrats' chances of victory at 70%. The Democrats may tighten oversight and regulation of Big Tech, which would add to the problems facing artificial intelligence. Local authorities also face public pressure to block data centre construction.
Investors now worry less about whether technology companies can meet Wall Street's forecasts than about the colossal spending that is eating into free cash flow. Meanwhile, Wells Fargo points to slowing profit growth among S&P 500 companies, from 32% to 26% y/y in the third quarter. That figure remains high by historical standards, which are typically 8–12%.
Source: ActionForex
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