Data center stocks sold off despite 3.03% Dow gain; market reactions diverge after US midterm elections
In the market following the US midterm elections, the easing of political uncertainty was welcomed.
The Dow Jones Industrial Average rose 3.03%, but data center-related stocks saw selling.
Differences between sectors emerged that could not be captured by the index rise alone.
The decline in crude oil is a movement that also relates to Japan’s fuel import costs.
However, due to the yen exchange rate and the time lag in price pass-through, a drop in futures prices does not necessarily mean an immediate reduction in the burden on households.
Based on information up to the morning of November 5th, Japan time, we will organize the market reactions and upcoming US economic indicators.
Key points for today
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The Dow Jones Industrial Average closed at $53,356.12, up 3.03%, on November 4th in the US.
Selling occurred in data center-related stocks. -
WTI crude oil futures for December delivery closed at $88.12 per barrel, down 8.29%, on November 4th in the US.
Expectations regarding the situation in the Middle East served as a catalyst. -
The dollar-yen exchange rate was around 158.43 yen in the New York market on November 4th in the US.
This was a dollar depreciation/yen appreciation of about 25 sen compared to the previous day. -
On November 4th, the Nikkei Stock Average in Japan closed at 62,188.63 yen, down 893.23 yen.
AI and semiconductor-related stocks were sold. -
COMEX gold futures for December delivery closed at $4,073.00 per troy ounce, up 3.37%, on November 4th in the US.
It was reported that a weaker dollar and lower US interest rates provided support. -
Preliminary US productivity and cost data are scheduled for release at 22:30 on November 5th, Japan time, and the US employment report is scheduled for 22:30 on November 6th.
The periods covered are the July-September quarter and October, respectively.
1. Selling in data center-related stocks amid US stock gains
The Dow Jones Industrial Average closed at $53,356.12 on November 4th in the US, up 3.03% from the previous business day.
It is reported that political uncertainty has receded as the Democratic Party secured both houses of Congress and President Trump showed a willingness to accept the election results and cooperate.
Meanwhile, selling occurred in data center-related stocks.
The impact of changes in congressional and state politics on the business environment is being noted.
It is necessary to read the overall market rise and the evaluation of individual businesses separately.
Behind the stock price rise were expectations and caution regarding policies that differ by sector.
2. Lower crude oil prices affect fuel costs, but there is a time lag in reflecting this in household budgets
WTI crude oil futures for December delivery closed at $88.12 per barrel on November 4th in the US, down 8.29% from the previous business day.
It is reported that expectations that US military action against Iran would be restrained following the election results served as a catalyst.
However, this is an expectation priced in by the market and does not mean that the end of the conflict or the normalization of supply is guaranteed.
For Japan, lower crude oil prices are a factor that pushes down fuel import costs.
Because that effect is also influenced by exchange rates, procurement contracts, and inventory, it cannot be said that gasoline and electricity prices will immediately fall by the same percentage.
3. Tug-of-war in the yen exchange rate between lower US interest rates and stock price gains
In the New York foreign exchange market on November 4, local US time, the dollar-yen was reported at around 158.43 yen.
Compared to the previous day, this is a dollar depreciation and yen appreciation of about 25 sen.
During trading, there were moments when the dollar was bought due to rising US stocks, but the decline in US long-term interest rates and lower crude oil prices weighed on the dollar.
The market after the election did not move in one direction; rather, different factors were in a tug-of-war.
When considering Japan’s import burden, the overall picture cannot be grasped by crude oil prices alone.
Both dollar-denominated resource prices and the exchange rate used when paying for them in yen are involved.
4. Japanese stocks benefit from both semiconductor stock declines and lower oil prices
In the Tokyo market on November 4, the Nikkei Stock Average closed at 62,188.63 yen, down 893.23 yen from the previous business day.
While AI and semiconductor-related stocks were sold, buying interest entered in the afternoon session, narrowing the decline.
There were differences by industry, such as air transport stocks rising due to lower crude oil prices.
This Tokyo market closing price was prior to the subsequent rise in the US market.
When comparing US and Japanese indices, attention is also paid to the order of trading hours.
Even with the same political situation or changes in resource prices, the perception of stock prices differed depending on the nature of the business.
5. Gold futures also rise, supported by a weaker dollar and lower US interest rates
The COMEX gold futures December contract on November 4, local US time, closed at $4,073.00 per troy ounce, up 3.37% from the previous business day.
It is reported that the post-election dollar depreciation and the decline in US Treasury yields supported gold prices.
While crude oil fell, gold rose, showing divergent price movements even within the commodity market.
The prices shown here are dollar-denominated futures prices.
The calculation methods for exchange rates and prices differ from the yen-denominated gold prices displayed domestically or retail sales prices.
The dollar-denominated rate of increase cannot be read directly as a price change in Japan.
6. Reading economic realities through US labor costs and employment going forward
According to the official schedule of the US Bureau of Labor Statistics, the preliminary report on productivity and costs for the July-September quarter will be released at 22:30 JST on November 5, and the October employment statistics will be released at 22:30 JST on November 6.
Apart from expectations surrounding the election results, these will be materials indicating the reality of corporate labor costs and employment.
The point of focus is how these results will connect to market views on prices and interest rates.
Rather than pre-determining figures or market direction before the announcement, we will organize the results and market reactions separately.
This article is intended for the provision of information and commentary based on public information and does not recommend the buying or selling of individual financial products.
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This article is intended for information provision and economic commentary based on publicly available information.
It does not recommend the buying or selling of any specific financial products.