After a sharp decline on 5 and 6 November, concerns are spreading that the Dow Jones has formed a head-and-shoulders top and may move lower. Japanese stocks faced stronger selling pressure in AI- and semiconductor-related names, and the Nikkei Average extended its sharp decline after falling for 4 straight days, dropping below ¥60,000 for the first time in 7 months.
In the U.S. market, the Dow Jones suffered a sharp 3.43% decline from the previous day on 5 November, as concerns over data-center construction and uncertainty about the policy outlook after the midterm elections broadened selling. It fell again on 6 November, closing down 0.46%, while the Nasdaq rebounded and showed signs of recovery. Strong employment data and movements in AI-related stocks affected by satellite data emerged as factors shaping the market's direction.
In China, concerns over tighter U.S. regulations involving AI and data centers remained a burden, but dip-buying emerged on expectations for government market-support measures. The Shanghai Composite traded slightly higher on 5 November, but the market as a whole remained soft, partly because of lower oil prices. Defensive sectors such as financials and pharmaceuticals were relatively stable at times.
Japanese stocks fell broadly in response to the sharp decline in U.S. equities. The Nikkei Average fell ¥1,110 on 5 November and ¥3,643 on 6 November. AI- and semiconductor-related stocks accounted for a large share of the contribution to the decline, while the TOPIX and JPX Prime 150 Index also posted notable falls. The Nikkei Average continued to decline from its record high, indicating a prolonged adjustment phase.
The Nikkei Average's divergence from its moving averages and the sharp rise in the Nikkei VIX suggest that signs of a rebound are not absent, although the possibility of an approaching short-covering phase has also been noted. A short-term rebound may occur depending on trends in U.S. AI- and semiconductor-related stocks.