Stocks Just Had Their Worst Second Day After a Midpoint in Nearly a Century

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SPY plunged 4% and DIA 4% as the S&P 500 posted its worst second day after a midterm period in nearly a century.
SPY’s heavy weighting leaves NVIDIA at 8% of the fund, while the price-weighted Dow was flat for the month with less exposure to AI.
Chips fell 12% and technology fell 7% as all 11 sectors of the S&P 500 fell, with the VIX jumping 70%.
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Two sessions after Democrats won the November 3 midterm elections, the S&P 500 Index fell 334.89 points, or 4.36 percent, to 7,353.73 on November 5, 2026. It was the worst second day after a midterm in nearly a century of data, and the decline was nearly double the roughly 2.3 percent drop that had established the previous brand in 2002.

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The Dow Jones lost 1,833.06 points, or 3.44%, to 51,523.06. On Wednesday, it had gained 1,569.40 points to close at 53,356.12, so the selloff wiped out the post-election rally. The Nasdaq Composite fell 5.52% to 24,315.00 and the Russell 2000 fell 4.45% to 2,729.89.

THE State Street SPDR S&P 500 ETF Trust (NYSEARCA: SPY) fell 4.41% to close at $733.00. THE State Street SPDR Dow Jones Industrial Average ETF Trust (NYSEARCA:DIA) fell 3.53% to $514.27. In the evening, the two funds were listed at $734.39 and $513.37.

All 11 sectors of the S&P 500 finished lower. Tech fell 7.3% and the Philadelphia chip index lost 12%, the second-biggest decline in its history.

The VIX, Wall Street’s measure of expected volatility, rose 69.66% to 28.18. As of 2:58 p.m. ET, retail investors had sold a net $358 million worth of individual stocks. This tally was incomplete, but it was on track to become the largest since the $502 million sold on March 17, 2020.

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Three explanations, with gaps in each

The first explanation is that a Democratic Congress could slow down the construction of AI data centers. On Election Day, voters supported limits on 40 of 41 ballot measures in local data centers. However, these were local zoning votes, and no companies have yet reported a project delayed/blocked because of these votes.

Second, rates traders have pushed back the expected date for the Fed’s next rate hike to March, while the target rate remains unchanged at 4.00%. When investors expect upside, they apply a higher discount rate to future earnings, and expensive growth stocks lose the most value. Bonds tell a different story, as the 2-year Treasury yield fell from 4.58% to 4.46%.

The third comes from Nomura strategist Charlie McElligott, who outlined hedge funds’ race to lock in this year’s gains before the end of the year. This suggests traders are reducing their positions, even as corporate earnings expectations hold.

SPY fell 5.92% through November 5, while DIA was almost flat at -0.06%. SPY weights holdings based on their market value, which places Nvidia (NASDAQ:NVDA) at 7.58% of the fund. The Dow weights its 30 stocks based on share price, making it less exposed to AI.

The S&P 500 fell 3% for the week through November 5. For the year, it’s still up 7.4% and the Dow is up 7.2%.

What a Lower Forward P/E Means for SPY Holders

Analyst earnings estimates hit a new high just as prices fell, pushing the S&P 500’s forward P/E below 18x. Evidence indicates that traders are reducing their positions, while analysts’ profit estimates have continued to rise.

For investors seeking their technology exposure, DIA offers a different weighting approach. Its stable month shows that it resisted this sale because it has less AI. For readers thinking about the other side of this business, we’ve profiled seven vendors supporting data center expansion, from power to cooling to networking, in a free report you can view here.

There are two ways to verify this view. This holds if the VIX closes below 20 and SPY stays above its $733.00 close through November 30, 2026. It is not correct if the VIX closes above 30 and companies start reporting offset data center projects.

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Contact editorial@247wallst.com for any questions or corrections.

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Quick reading

Now Available: The Definitive Guide to Retirement Income

Three explanations, with gaps in each

What a Lower Forward P/E Means for SPY Holders

Published: The Definitive Guide to Retirement Income

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