The market plunged, led by technology stocks, after the Democratic Party won majorities in both chambers in the US midterm elections. While the market's longer-term strength remains in focus, regulation and interest rates will be key areas to watch. Convey only the key points in approximately 80–120 characters.
The market reacted immediately after the Democratic Party won majorities in both the Senate and House of Representatives in the US midterm elections. Stock prices rose immediately after the results were counted, but anxiety spread the following day, led by technology stocks, with the Nasdaq 100 falling 6.4% and the S&P 500 falling 4.4%. The Japanese market also reacted during the same period, with the yen strengthening and the Nikkei Average falling amid heightened caution.
Markets had remained strong, with the Nikkei Average posting a substantial rise over the previous 4 years. The post-election decline was viewed as a correction within this broader strength, and its movement differed from the average pattern seen in previous midterm-election years.
Expectations of tighter regulation of AI and data centers became a market focus, and selling intensified after the election, particularly in semiconductor stocks. At the same time, some data-center construction plans were being shifted or delayed, leading to views that the impact of regulation may be limited to the location and cost of capital investment.
The outlook for interest rates has also been affected. Expectations for the number of rate hikes had declined before the election, but the possibility of an additional hike remains depending on the December FOMC meeting and year-end meetings. While the direction of AI investment could change depending on the substance of the regulations, some believe there is not yet enough evidence to confirm a direct slowdown in investment.