[October 23] Today's Stock Market Report: Nikkei 225 Dramatically Trims Losses by Nearly 1,200 Yen After Plunging Over 1,400 Yen｜玲 女子大生が経済を語る

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The bottom-fishing strength of the “25-day moving average -7% deviation” that rebounded from the US Meta “first-ever FCF deficit since listing” shock, plus Mercari’s surge and Fanuc’s strong earnings. No blind spots in the AI bubble.

• Nikkei 225 Closing Price : 62,693.16 yen (-214.68 (-0.34%))

• TOPIX : 3,965.81 points (-31.69 (-0.79%))

• Trading Value (TSE Prime) : 8.938322 trillion yen

• Number of advancing stocks: 553 / Number of declining stocks: 951 / Unchanged stocks: 48

• External Market Environment: US SOX index -6.7%, US Nasdaq -2.6%, US Dow slightly higher; US tech stocks plunged due to Meta’s first-ever FCF deficit since listing and Lam Research’s outlook.

• Notes: TDK, Nitto Denko, and Konami Group declined. On the other hand, Fast Retailing and Chugai Pharmaceutical rose.

1. Market Close: Absorbing the shock of the 6.7% crash in the US SOX index! Amazing resilience after a temporary drop of over 1,400 yen.

On Friday, October 23, 2026, the Tokyo stock market, heading into the weekend, saw intense selling from the opening, centered on semiconductor manufacturing equipment and electronic component stocks, following the flow of the previous day’s US market where the Nasdaq Composite Index fell 2.6% and the Philadelphia Semiconductor Index (SOX Index) recorded a devastating 6.7% drop. The Nikkei 225 accelerated its decline toward the morning session, and the drop during trading hours exceeded 1,400 yen, leading to a panic-like development where it plummeted to around 61,500 yen.

However, after hitting the bottom in the morning session, the Tokyo market demonstrated amazing downside resistance and resilience. The Nikkei 225, which had already entered oversold territory at yesterday’s closing price, reached a statistically extreme oversold level (a zone requiring caution against sharp drops) of “a -7% (-7.0%) downward deviation from the 25-day moving average” due to this morning’s sharp drop. Taking this as a signal, as the afternoon trading (afternoon session) began, institutional investors’ dip-buying focused on the short-term oversold state and hedge funds’ short covering flowed in fiercely. In addition to the rapid buying back of some AI and semiconductor-related stocks that had been sold off in the morning, domestic demand defensive stocks such as real estate, retail, food, and pharmaceuticals, which benefited from the decline in long-term interest rates and the appreciation of the yen, firmly supported the market throughout the day.

As a result, the Nikkei 225 performed a dramatic trimming of losses by the market close, reducing the decline by nearly 1,200 yen from its low. The closing price of the Nikkei 225 was 62,693.16 yen, down 214.68 yen from the previous business day (-0.34%), ending this week’s trading with a slight decline for the second consecutive business day.

Meanwhile, the TOPIX (Tokyo Stock Price Index), which is composed of a wide range of stocks on the TSE Prime Market, was weighed down by the decline in bank stocks accompanying the drop in interest rates, and the closing price was down 31.69 points (-0.79%) to 3,965.81 points, falling for the second consecutive day.

The trading value on the TSE Prime Market reached 8.938322 trillion yen (estimated trading volume of 2.88432 billion shares), expanding significantly to the scale of approximately 9 trillion yen. It was a complete turnaround from the thin trading of under 7 trillion yen that had continued since the previous week, presenting the appearance of a “high-volume selling climax” where massive real-demand dip-buying swallowed the panic-like dumping head-on.

In today’s market, the shock from the earnings report released by U.S.-based Meta Platforms, which stated “due to massive AI investments, free cash flow (FCF) has fallen into the red for the first time since listing,” shook tech stocks, and domestically, Disco hit a year-to-date low. However, on the other hand, Mercari surged 7.3% following the announcement of a partnership and the launch of Meta’s consumer AI agent “Muse” in Japan, and after the close, Fanuc announced a significant upward revision and share buybacks that exceeded market expectations, marking a day that proved the market tide has begun to shift from “excessive fear of infrastructure investment” to “re-evaluation of AI service implementation and actual earnings.”

2. The Mechanism of the Market Plunge and Dramatic Rebound: The U.S. Meta “First FCF Deficit Since Listing” Shock and the Counterattack from the “25-Day Moving Average Minus 7% Deviation”

We explain the three major mechanisms of the market fluctuation: why, after the SOX index plummeted 6.7% in the U.S. market the previous night and the Nikkei Average was hammered down by over 1,400 yen in the morning session in Tokyo, it was able to be fiercely bought back by nearly 1,200 yen after entering the afternoon session, recovering to a loss of only 214 yen.

① The Reality Meta Confronted: The First “Free Cash Flow Deficit” Since Listing

In the U.S. market the previous day (the 22nd), while the Dow Jones Industrial Average rose slightly, the tech-heavy Nasdaq Composite Index fell 2.6%, and the Philadelphia Semiconductor Index (SOX Index) recorded a historic crash of 6.7% from the previous day.

The primary epicenter of this tech sell-off was the U.S. Meta Platforms’ July-September earnings report released after the close the previous day. More than the superficial figures for revenue and profit, the market was deeply shocked by the fact that “free cash flow (FCF: surplus funds after deducting capital expenditures, etc., from operating cash flow), which indicates a company’s pure cash-generating ability, fell into the red for the first time since the company’s listing.”

Meta is currently pushing through unprecedented capital expenditures (Capex) on the scale of $130 billion to $145 billion annually for the advancement of generative AI models and the construction of ultra-large data centers. Until now, the market had been optimistic about the credit concerns regarding emerging AI cloud companies like CoreWeave that surfaced last week, viewing it as “a problem only for emerging companies with weak financial foundations, while giant tech companies (hyperscalers) with abundant cash on hand are rock solid.” However, the fact that even an ultra-high-profit company like Meta saw its free cash flow fall into the red due to the burden of massive AI investments intensely triggered “anxiety over financial deterioration and investment recovery due to massive AI-related investments” among investors.

Furthermore, Lam Research, a major U.S. semiconductor manufacturing equipment company that also announced earnings that day, saw its October-December performance outlook remain in line with market expectations, leading to disappointment selling from a market that had expected a rapid acceleration due to the AI boom, which compounded the situation and triggered a total collapse of U.S. semiconductor stocks.

② Why did it recover by “1,200 yen” from the morning plunge of over 1,400 yen? (The Power of -7% Deviation)

In the Tokyo market, which took the full brunt of this U.S. tech crash, selling flooded into semiconductor manufacturing equipment and electronic component stocks from the opening, and the Nikkei Average recorded a decline of over 1,400 yen during the morning.

However, this panic-selling phase became the turning point for the market. At the core of the dramatic afternoon rebound is a “clear oversold signal in technical indicators.” At the low point of today’s Nikkei Average, the downward deviation rate from the 25-day moving average as of the previous day had reached “minus 7%.”

Looking back, on October 6, when the Nikkei Average broke through the 70,000 yen mark, the upward deviation rate from the 25-day line reached “plus 7.3%,” and an adjustment began due to the limit of being overbought. In just over half a month, the pendulum swung all the way to the extreme oversold territory of “minus 7%” in the opposite direction. Statistically, a minus 7% deviation is a level where a short-term autonomous rebound (short covering) is inevitable, regardless of any bad news. Entering the afternoon session, fierce buybacks entered some of the AI semiconductor stocks that had been sold in the morning by large investors aware of the oversold condition, and the shift of funds to domestic demand stocks accelerated, creating a V-shaped recovery that reduced the decline by nearly 1,200 yen by the close.

3. Internal Market Structure: Ironclad Defense of Domestic Demand/Defensive Stocks and SoftBank Group’s “High-Range Close”

Examining the internal market today, where the Nikkei Average showed a phenomenal comeback to a loss of only 214 yen, two “driving forces” that supported the market emerge.

Positive Contribution Group (The Breakwater That Prevented Market Collapse)
Domestic Demand/Defensive Stocks: Real estate, retail, food, and pharmaceutical stocks, which benefited from lower interest rates and a stronger yen, remained in positive territory throughout the day, firmly supporting the Nikkei Average’s downside.

Buybacks in some AI/semiconductor-related stocks: Some of the major semiconductor stocks that were heavily sold early on emerged into positive territory due to the awareness of being oversold in the afternoon.

Of particular note to market participants was the price movement of SoftBank Group. Although it was heavily sold in the morning following the U.S. tech decline, a massive wave of buybacks flowed in during the afternoon, and although it closed in negative territory compared to the previous day, the intraday candlestick drew a long lower shadow and closed at “nearly the highest level of the day.” It can be said that this is irrefutable evidence that excessive pessimism regarding AI investment rapidly receded in the afternoon and that large-scale funds greedily picked up stocks at the lows.

4. Sector/Industry Trends: “8 Sectors Up vs. 25 Sectors Down” out of 33! “Real Estate, Retail, Food” Surge on Lower Interest Rates and Stronger Yen, While Banks and Machinery Adjust

Looking at the stock price indices by industry, “8 sectors rose” and “25 sectors fell” out of all 33 industries. However, the lineup of the 8 sectors that rose shows a logical shift of funds that perfectly captured the current changes in the macro environment (lower interest rates and a stronger yen).

【Rising Sector ①: Real Estate Industry (Reason for the highest growth rate among all 33 industries)】

Today, the sector that showed the strongest growth among all industries was Real Estate. Major developer stocks such as Mitsui Fudosan, Mitsubishi Estate, and Sumitomo Realty & Development were all bought up. In today’s market, following investors’ risk-averse stance due to falling stock prices, buying for government bonds (fixed income), which are considered relatively safe assets, increased, leading to a decline in domestic long-term interest rates. Real estate stocks have been forced into a long period of sluggish performance this year, as the Bank of Japan’s interest rate hikes and rising long-term interest rates were perceived as headwinds due to increased borrowing costs and the real estate market climate. However, with long-term interest rates turning downward recently, concerns over excessive interest burdens have eased, leading institutional investors to focus on buying back the significantly lagging real estate sector.

[Rising Sector 2: Retail, Fishery/Agriculture/Forestry, and Food (Tailwinds from the shift to a stronger yen)]

Following real estate, the sectors that occupied the top spots in growth were Retail, Fishery/Agriculture/Forestry, and Food, which are domestic demand-driven consumer sectors. The fact that the dollar/yen exchange rate in the foreign exchange market is leaning slightly toward a stronger yen has sparked expectations that this will lead to a ‘decrease in raw material and procurement costs (improvement in gross profit margins)’ for these companies that import food and daily necessities from overseas, causing restaurant stocks, food stocks, and retail stocks like Nitori to perform steadily throughout the day.

[The Truth Behind the Declining Sectors: ‘Banks’ due to falling interest rates and ‘Machinery’ due to guidance concerns]

On the other hand, the top of the 25 declining sectors was Banking. As the flip side of the reason why real estate stocks were bought, the decline in long-term interest rates accompanying the flight to safe assets retreated expectations for the expansion of bank lending margins, inducing position-adjustment selling in mega-bank and regional bank stocks. Also, the Machinery sector was affected by the sharp drop in Disco, which will be mentioned later, and Non-ferrous metals were also pushed down by selling pressure on wire and cable stocks.

5. Notable Individual Stocks

Today, we will thoroughly explain four notable stocks whose fortunes were divided by the surge following the arrival of Meta’s AI agent in Japan, surprise strong earnings after the close, the renewal of year-to-date lows blocked by the wall of expectations, and a sharp drop due to the discovery of unauthorized access.

① Mercari: +7.3% significant rise / Lightning partnership with US Meta’s AI agent ‘Muse’ landing in Japan!

Mercari, the largest flea market app, completely cut through the storm of a broad sell-off in tech stocks, staging a massive surge of +7.3% from the previous day (+253 yen, closing price 3,704 yen).

Following the official launch of the personal autonomous AI agent app ‘Muse’, which is garnering significant attention in the US, in Japan by US Meta Platforms, and the announcement of a business partnership with Mercari as a major partner, Mercari stock has surged.

Muse is a next-generation AI app that autonomously executes everything from product searches and shopping to concert ticket and travel reservations, and final payment, based on user instructions. With this landing in Japan, collaboration has begun not only with Mercari but also with Money Forward, which handles the household account management and asset formation app ‘Money Forward ME’, and ‘Ticket Pia’, which develops event reservations, and a wide-ranging ecosystem connecting daily consumption and life activities is being established.

The market perceives that the era has arrived where AI automatically performs product searches, listing assistance, and payments within Mercari on behalf of humans, and expectations have grown that Gross Merchandise Value (GMV) and usage frequency will grow dramatically with the increase in transaction opportunities. While financial concerns linger regarding the AI infrastructure side due to the burden of massive capital investment, it has resulted in strong buying as a representative Japanese company that utilizes AI as a service and leads to direct revenue expansion.

② Fanuc

Fanuc, the world leader in factory automation (FA) and industrial robots, was pushed by market conditions during today’s trading hours and closed slightly down 0.6% from the previous day (37 yen lower at 5,587 yen), but in the first-half earnings report announced after the close, it disclosed extremely strong positive results that blew away the market’s pessimism.

The first-half (April-September) earnings announced by Fanuc showed that consolidated operating profit achieved a 36% increase compared to the same period last year, resulting in a strong finish that clearly exceeded the prior market consensus forecast.

Against the backdrop of strong performance, the full-year operating profit forecast for the fiscal year ending March 2027 was also upwardly revised, and a plan for a 31% profit increase compared to the previous fiscal year was presented. This was also a positive surprise that exceeded market expectations, and in addition, a share buyback with a limit of 50 billion yen was announced, showing an active stance toward shareholder returns.

Although the share buyback limit itself is not exceptionally large, the fact that it was launched in a set with the upward revision of the full-year forecast to a 31% profit increase, which exceeds market expectations, has a significant impact and will undoubtedly function as a strong tailwind for the stock price on Monday.

③ Disco (6146): -3.7% decline (-1,940 yen lower, closing price 49,290 yen) / 3Q profit plan falls short of market expectations, ‘renewing year-to-date low for the first time in 10 months’

Disco, the world leader in semiconductor precision processing equipment (cutting, grinding, polishing), fell -3.7% from the previous day (-1,940 yen lower, closing price 49,290 yen), renewing the year-to-date low set on January 5th of this year. It fell below the 50,000 yen mark, sinking to the lowest level in about 10 months.

After the close of trading on October 22nd, it announced its earnings for the first half of the fiscal year ending March 2027 (April-September), but the simultaneously disclosed future earnings outlook was disliked, and the stock price developed to renew its year-to-date low.

Regarding the first-half results, there was no major surprise for the market as the preliminary figures for non-consolidated sales and shipments had already been announced. The main factor prompting the sell-off this time lies in the fact that the consolidated profit plan for the third quarter (October-December) fell below the prior market consensus forecast.

Although the company tends to estimate its quarterly earnings outlook conservatively, market expectations had risen significantly due to the expanding demand for high-bandwidth memory (HBM) for generative AI. Because of this, the guidance was widely perceived with caution, with many feeling that the growth momentum is somewhat underwhelming, which fueled disappointment-driven selling.

④ GMO Internet

GMO Internet saw its stock price plunge by as much as 9.5% from the previous day during trading hours, and it remained weak, closing 2.5% lower.

The company announced that unauthorized access occurred on the ‘rental servers used for automated FX (foreign exchange margin) trading (such as desktop cloud services)’ that it provides. Following reports from users stating that ‘unauthorized operations and trades were performed on their FX trading accounts without their knowledge,’ an investigation revealed that user authentication information may have been viewed and stolen by a third party. Following the major PHP language vulnerability issue that shook the world the previous day, the occurrence of actual cyber damage and security risks led to a flood of selling due to concerns over customer churn and compensation costs.

6. Future Outlook: Next week is a week concentrated with three major events: ‘Japan-US Central Bank Meetings (setting the stage for December rate hikes),’ ‘GAFAM Earnings,’ and the ‘US Midterm Elections’!

Today’s Tokyo market proved its bottoming-out strength at a 7% deviation below the 25-day moving average, as the Nikkei Average recovered nearly 1,200 yen from a panic drop of over 1,400 yen.

Next week (the fifth week of October) will be an extremely important week where three major events overlap: ‘Japan-US Monetary Policy Meetings,’ ‘US Mega-Tech Earnings,’ and ‘Pre-US Midterm Election Sentiment.’

① Japan-US Monetary Policy Meetings (US FOMC & Bank of Japan Monetary Policy Meeting)

For the October meetings, both Japan and the US are expected to ‘maintain (keep unchanged)’ their policy interest rates.
Furthermore, the market has already largely priced in a ‘simultaneous interest rate hike by Japan and the US at the December meetings.’
The biggest focus of the Bank of Japan meeting is whether the ‘Outlook for Economic Activity and Prices (Outlook Report)’ released after the meeting will show an ‘upward revision of price forecasts.’ This will measure the probability of a December rate hike.

② US Mega-Tech (Alphabet, Microsoft, Amazon) & Memory Company Earnings Announcements

・The points of focus, in addition to the earnings themselves, are ‘Capital Expenditure (Capex) Plans’ and ‘Cash Flow Outlook’.
Since financial concerns have intensified following Meta’s FCF turning into a deficit today, if these three companies demonstrate ‘overwhelming strength in AI-related demand’ and ‘strong confidence in investment recovery (free cash flow generation),’ the current excessive pessimism will be wiped away at once.
Due to today’s sharp drop in stock prices, the market’s prior expectations have already fallen more than enough. Because the hurdle has been lowered, after passing the earnings announcements safely, it will likely become a ‘market environment prone to a rebound after clearing uncertainties’.

③ US Midterm Elections (Next week is the final week before voting)

In the latest polls, the view has emerged that ‘the opposition Democratic Party is increasingly likely to regain control of both the House and the Senate.’
For the market, a ‘Republican-led’ scenario, which promotes the continuation of corporate tax cuts and deregulation, is more likely to be received positively. Therefore, it is necessary to be aware that reports of Democratic Party dominance may strengthen investors’ wait-and-see and cautious stance before the election, potentially acting as a weight that temporarily suppresses the upside of the market.

Investment strategy to capture the ‘rebound after clearing uncertainties’ following the bottoming out

The greatest truth proven by today’s market is that ‘at around 61,500 yen for the Nikkei Average (7% downward deviation from the 25-day moving average), the extreme of short-term overselling (selling climax) has already passed’.

The fact that the market was bought back by nearly 1,200 yen in the afternoon and trading value surged to approximately 8.9 trillion yen, despite the worst external shock of the US SOX index plunging 6.7%, tells us that calm long-term capital absorbed all the panic selling. Furthermore, after the close, Fanuc, a symbol of Japanese manufacturing, provided the best possible answer with an ‘upward revision to a 31% increase in full-year operating profit and a share buyback.’

While there is a possibility that high volatility will continue next week due to the wait-and-see mood before the US midterm elections, expectations (hurdles) for earnings have fallen to the limit due to the sharp drop in stock prices, and passing the earnings announcements of Alphabet, Microsoft, and Amazon will be the starting gun for the biggest ‘rebound after clearing uncertainties’.

We are entering an excellent investment phase where we should firmly hold ‘winners of AI-implemented services’ like Mercari and Money Forward, which surged today due to their partnership with Meta’s AI agent ‘Muse,’ Fanuc, which announced strong earnings after the close, and high-quality domestic demand stocks such as real estate, retail, and food that have gained the support of lower interest rates and a stronger yen, while accurately capturing the autonomous rebound of SoftBank Group and major semiconductor stocks that have started to reverse from the extreme of being oversold.