Wall Street celebrated in the wake of the midterm elections and woke up Thursday to the worst tech day since the 2020 COVID crash. However, when excluding AI trading, most stocks are barely noticed.
The equal-weighted S&P 500 index (RSP), which stands in for the typical stock, closed at a record high on Wednesday and finished the week about 1% from where it started.
Stock indexes were not so lucky. The S&P 500 (^GSPC) and Nasdaq (^IXIC) each fell about 3% for a fourth straight week of losses, capping a week of whiplash that ended with a Friday rebound in chip stocks.
The sale had an outcome that few investors would have bet on a year ago. This made the technology cheaper than the market as a whole.
S&P 500 technology stocks (XLK) traded at about 17 times expected earnings this week, below the broader index’s 18 times for the first time since 2017, Truist Wealth chief investment officer Keith Lerner wrote in a note Thursday. As of the October 2025 peak, the sector has been recovered 32 times.
“With a P/E of 32.0x last year, the market received a lot of good news,” Lerner wrote. “We can say that at almost half of this level, the market is already pricing in a lot of bad news.”
The chips paid the price. The PHLX Semiconductor Index (^SOX) fell for a fifth straight week and lost nearly 30% during that period, according to Yahoo Finance calculations. Micron (MU) and Sandisk (SNDK) each lost more than 20% this week alone.
Lerner sees “kind of a buyers’ strike in the tech sector,” and he told Yahoo Finance on Friday that chips were the first to feel a slowdown in data center construction, a risk that loomed at the midpoint. But slower development could ease the cash drain for the biggest AI spenders.
“If that results in a bit of a slowdown and maybe a little bit of positive cash flow, I think that could actually extend the cycle,” he said.
Truist’s advice is to maintain an overweight to U.S. large-caps and add small-caps “as a partial hedge against periodic strong rotations away from mega-cap technologies.” The company also notes that shares have risen every year after each midterm since 1946.
The story promotes patience, especially
The S&P 500 has had 33 streaks of four or more losing weeks since 1990. Three months later, it was higher about 80% of the time, with a median gain of 6%, according to Yahoo Finance calculations.
That’s better than the typical three-month return of around 3% after any week.
The exceptions came during the dotcom collapse and the 2008 financial crisis, when the S&P 500 continued to decline for another year.
Michael Martin, founder of TraderMindset.com, isn’t buying the dip. “Now is the time to raise cash,” Martin, who runs a commodity futures strategy with Victor “Trader Vic” Sperandeo, told Yahoo Finance. “I don’t think these are buying opportunities. It’s all in a downtrend.”
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