Stock Market Today: Asian Stocks Rally on Tech Surge

The stock market today tells a story of relief. Asian stocks climbed on Tuesday, November 10, tracking Wall Street higher after a rally in technology shares and a slump in oil prices drove American benchmarks to their best day in seven months. South Korea's Kospi index jumped more than 4 percent, Japan's Nikkei 225 rose nearly 3 percent, and a broader gauge of Asian shares advanced about 2 percent, as buyers who had spent last week selling came back in force. The rebound was broad, it was led by the same chipmakers that had been sold hardest, and it carried global equities towards their best two-day gain in more than three months. The question hanging over the rally, as it always does after a week like last week, is whether the buying lasts or whether it is only a pause before the next leg down.

The move in Asia followed a powerful session on Wall Street on Monday, when the S&P 500 rallied the most since April 8 and a gauge of chipmakers surged nearly 7 percent. The Nasdaq 100 ended 3.4 percent higher, and the rally was broad enough to lift almost every corner of the American market. Futures for the American benchmarks edged higher in early Asian trading, suggesting that the momentum had carried overnight, even if the gains were modest. For investors who had watched their portfolios shrink through a brutal week, the two days of gains felt like a change in the weather. The test now is whether the change is real.

Wall Street's Best Day in Seven Months

Monday's session on Wall Street was the strongest in about seven months, and the numbers show how broad the recovery was. The S&P 500 rose 2.35 percent to 7,549.94, its strongest session since April 8. The Nasdaq Composite gained 2.74 percent to 25,253.14, the Dow Jones Industrial Average added 2.15 percent to 52,389.75, and the small-cap Russell 2000 did best of all, rising 3.15 percent. Wall Street's fear gauge, the VIX, fell by more than a fifth to 19.92, a sign that the panic that had gripped the market last week was easing.

The rally was led by exactly the shares that had been thrown out last week. A gauge of chipmakers that had lost more than 12 percent the previous week jumped 6.9 percent on Monday, with Nvidia the only faller in the index. The chipmaker's shares fell 4.2 percent to their lowest close since April 7, weighed down by the investigation into its chief executive, Jensen Huang, and by reports that he had been the target of a foreign intelligence operation. Every other name in the gauge rose, and the buying spread from semiconductors into the wider technology sector, lifting the Nasdaq 100 by 3.4 percent and carrying the broader market with it.

The character of the rally mattered as much as its size. Dip buyers stepped in after last week's selloff, betting that the selling had gone too far and that the underlying demand for artificial intelligence hardware and software had not disappeared. The buying was not confined to one sector or one country: it showed up in American chip stocks on Monday, and again in Asian chip stocks on Tuesday.

Asia Follows: Seoul Leads the Rally

Asia picked up the baton on Tuesday, and South Korea led the way. The Kospi index jumped more than 5 percent in early trading, so sharply that the exchange briefly switched off computerised buying, triggering its sidecar brake, which pauses programme buying for five minutes. The index settled to a gain of around 4 percent by the close, still the top performer in the region. Samsung Electronics rose roughly 5 percent and SK Hynix, the memory chipmaker, climbed around 6 percent, as the companies at the heart of the artificial intelligence supply chain led the recovery. Lower oil prices helped too: Korean Air and Asiana rallied more than 11 percent as cheaper fuel improved the outlook for airlines.

In Tokyo, the Nikkei 225 rose about 2.5 percent to near 60,250, and the broader Topix index gained around 2 percent. SoftBank jumped about 15 percent ahead of its results later in the day, with chip equipment makers Tokyo Electron and Advantest and memory maker Kioxia also sharply higher. Japan's market, like Korea's, is heavily weighted towards the technology and chip names that had been hit hardest in the selloff.

Taiwan's benchmark rose about 2 percent, and the MSCI Asia Pacific Index climbed around 2 percent. Hong Kong's Hang Seng rose 0.5 percent and the Shanghai Composite added 0.1 percent, a quieter performance from China, where the market has been less exposed to the artificial intelligence trade. Australia's S&P/ASX 200 rose 1.3 percent. Futures for the S&P 500 edged up 0.1 percent, while those for the Nasdaq 100 were little changed, suggesting that the American market would open close to flat after its big day.

The MSCI All Country World Index, the broadest measure of global equities, rose 0.4 percent on Tuesday, adding to Monday's 2.2 percent advance. On that measure, global stocks were on track for their best two-day gain in more than three months, a remarkable turnaround for a market that had finished last week at a six-month low.

Oil's Slide Gives Markets Breathing Room

The second engine of the rally was oil. Brent crude slumped almost 6 percent in the previous session to settle below 93 dollars a barrel, its lowest since August, and it slipped further on Tuesday to trade below 92 dollars. West Texas Intermediate crude fell to around 85 to 86 dollars a barrel. The sharp drop in oil prices has given markets some much-needed breathing room, and it has eased some of the inflation pressure that has been hanging over the global economy.

The fall in oil followed President Donald Trump's statement that further strikes on Iran would not be necessary, an indication that he is winding down the conflict after the midterm results underscored its unpopularity at home. The prospect of a quieter Middle East took the war premium out of the oil price, and the drop fed through to the wider market: it lowered the cost of energy for businesses and consumers, and reduced the pressure on central banks to keep interest rates high. The strategist Dilin Wu of Pepperstone Group put it plainly: the sharp drop in oil prices has given markets some much-needed breathing room, and it has eased some of the inflation pressure.

Gold, often the first place investors run when they are frightened, drifted lower as the mood improved, falling to around 4,112 to 4,130 dollars an ounce. The 10-year Treasury yield was steady at around 4.87 to 4.88 percent, a sign that the bond market was not yet convinced the rally would last. The pattern across assets was consistent: equities up, oil down, gold down, and bonds waiting to see what happens next.

Why Tech Sold Off Last Week

The rally only makes sense against the selloff that came before it. Last week was tumultuous for technology stocks, and chipmakers bore the brunt of it. The selling was sparked by worries that the Democrats' sweep of Congress in the midterm elections would lead to tougher oversight of the artificial intelligence sector, including tighter regulation of data centres and closer scrutiny of the subsidies and energy arrangements that underpin the build-out. The MSCI gauge of world equities finished last week at its lowest level since May, and a gauge of chipmakers lost more than 12 percent in a single week.

The view among some analysts is that the recent tech selloff represented a reset rather than the start of a structural downturn in the artificial intelligence investment cycle. Demand for artificial intelligence hardware remains strong, and the capital spending plans of the big technology companies still stretch years into the future. China reported October exports up 35.2 percent on a year earlier and imports up 41.6 percent, with demand for artificial intelligence hardware doing a lot of the lifting.

The CPI Test Ahead

The rally now walks into its first serious test. October's United States consumer prices data is due to be released on Tuesday, and investors will be watching it closely. Economists expect consumer prices to have risen 0.3 percent in October, with core prices, which strip out food and energy, rising 0.2 percent, a smaller increase than in September. The reading is the last before the next Federal Reserve meeting, and it will shape expectations for what the central bank does next.

Earnings will provide a second test. Results due this week from technology companies will put the profitability of artificial intelligence ambitions under the microscope, at a moment when the massive costs of the build-out are being questioned by the very companies doing the spending. The question investors keep asking is whether the enormous capital spending on data centres, chips and power will produce adequate returns, and how long the build-out can continue at its current pace. The answers will arrive one earnings report at a time.

What Happens Next

The durability of the rebound remains in question. Regulatory risks are now layered on top of concerns that were already weighing on the sector: stretched valuations, soaring capital spending, and uncertainty over the payoff from massive artificial intelligence investments. The selloff last week showed how quickly sentiment can turn when a new risk appears, and the midterm results have changed the regulatory outlook in a way that will not be reversed by two days of gains. The market is no longer willing to assume the best, and the next piece of bad news will test whether the buyers who stepped in on Monday and Tuesday are willing to stay.

For now, the facts are these: the S&P 500 posted its best day since April, the Nasdaq 100 climbed 3.4 percent, a gauge of chip stocks surged nearly 7 percent, and Asian markets followed with South Korea's Kospi up around 4 percent and Japan's Nikkei up nearly 3 percent. Brent crude has fallen below 92 dollars a barrel, its lowest since August, and gold has drifted lower as fear has eased. The next data point is the October inflation report, and after that the earnings season will have its say. Two days of gains have repaired some of the damage from last week. Whether they have repaired the confidence behind the market is a question only the next few weeks can answer.

Source: Bloomberg