Data-centre backlash erases the Dow Jones Industrial Average’s midterm rally

• At its lowest since 14 October, the DJIA gives back Wednesday's gains amid the data-centre backlash.
• About a third of the points shed come from Goldman Sachs and Caterpillar, compared with about 6% from Nvidia.
• A 65K rise in October payrolls is forecast, following September's 29K, with the release due on Friday at 13:30 GMT.

Just above 51,500, the Dow Jones Industrial Average is trading below Tuesday's close at its weakest level since 14 October. Having recorded its strongest session since April 2025 on Wednesday, the index is heading for its worst since that same month on Thursday, with both moves driven by the same election result. Of its thirty constituents, twenty-nine are down; Coca-Cola (KO) is the exception.

What began as a sell-off in chipmakers has spread across the market. Chip stocks collectively are heading for their worst session since March 2020, while the Nasdaq Composite sits more than 10% beneath its October record. At 28, the Cboe Volatility Index (VIX) reached its highest level since 31 March. Tuesday's result is being read by investors as a verdict on the data-centre expansion, although the Dow has less exposure to that trade than the other two indices.

Goldman Sachs weighs three times as heavily as Nvidia on the decline

Share prices, rather than company size, determine each constituent's influence on the price-weighted Dow. At about $870 per share, Goldman Sachs (GS) represents a tenth of the index; a decline of about 6% in its shares accounts for roughly a fifth of the points shed. By contrast, Nvidia (NVDA), trading at about $180, carries a 2% weight, so its 9% fall contributes about 6% of the loss. Despite falling more sharply than the bank, the $4 trillion company had only about a third of its impact on the Dow.

The next-largest downward contribution comes from Caterpillar (CAT). In its third-quarter results, reported on 29 October, power generation sales increased 30% to $3.42 billion, chiefly from turbines and large engines for data centres. Among Dow constituents, that gives it the most direct exposure to the expansion now called into question by the election. Apple, Amazon, Alphabet, Microsoft and Nvidia, five of the largest US technology companies, all belong to the index, yet their combined contribution is less than a fifth of the decline. Banks, industrials, healthcare and the remaining constituents account for the other four fifths.

For banks, there is an additional concern: Senator Elizabeth Warren is expected to take over the Senate Banking Committee in January and has already called on regulators to withdraw three bank capital proposals. JPMorgan (JPM) has lost about 4%. Together, JPMorgan and Goldman carry about 14% of the price-weighted Dow, compared with about 2% of the S&P 500. As a result, the committee's stance on bank capital has a much greater influence on the Dow than on the broader index.

March legislation set out the push to halt data-centre construction

On 25 March, Senator Bernie Sanders and Representative Alexandria Ocasio-Cortez introduced the AI Data Center Moratorium Act. The bill would stop new construction until Congress enacts artificial intelligence (AI) regulation. Following the results on Wednesday, Sanders renewed his call for a halt. By that point, lawmakers in at least 11 states had put forward their own proposed pauses.

Voters supported restrictions in nearly all of the more than 40 local data-centre measures on Tuesday's ballots. In Texas and Ohio, both centres of the construction boom, Democrats secured the Senate seat and the governor's office after campaigns that featured data centres as an issue. According to Fitch, regulatory obstacles may affect a major share of planned capacity in Texas, Georgia and Ohio. UBS puts the share of capacity planned for 2028 that could be at risk from construction pauses at about 30%. Even Alphabet (GOOGL), which unveiled a $17 billion data centre in Wyoming during the session, saw its shares decline alongside the rest.

Markets price in December ahead of Friday's payrolls

Initial jobless claims dropped to 189K in the week to 31 October, below the 196K forecast and matching the lowest figure since 1969. The encouraging economic releases on Thursday drew no trading response. Productivity in the third quarter increased 3.6%, exceeding the expected 2.5%, while unit labour costs declined 0.7%, their first fall since the second quarter of 2025. Nevertheless, the 10-year Treasury yield slipped to about 4.85%.

Inflationary pressure is spreading through the economy and the labour market could strengthen, according to Cleveland Fed President Beth Hammack. Richmond Fed President Tom Barkin identified inflation as the Fed's foremost risk, adding that the AI expansion has increased demand. He also noted that data centres employ too few people to develop natural constituencies within their host communities. After the Fed left rates at 3.75%-4.00% on 28 October, futures were assigning close to an 80% probability to an increase at the 9 December meeting as the session began.

Friday's October payrolls release, due at 13:30 GMT, is expected to show 65K jobs added, up from 29K in September. Forecasts put unemployment unchanged at 4.2% and average hourly earnings at 0.3% MoM. A reading close to expectations would keep the December increase on course, adding higher borrowing costs to Thursday's concerns about a slower buildout. A miss would reduce the likelihood of an increase but shift the concern towards a slowing economy, offering a different reason to sell the same index. This is the first of two payrolls reports available to the Fed before 9 December; futures have already priced the meeting without either release.

The Dow moves within reach of its 200-day average

Resistance: Near 52,150, the 50-day Exponential Moving Average (EMA) presents the first barrier. The index closed above it on Wednesday for the first time since 29 October, but held that position for only one session. Further up sit the late-October peak near 52,900 and Thursday's pre-open peak just below 53,800, the point at which the results-driven rally ran out of momentum.

Support: Having set its lowest level since 14 October just below 51,500 on Thursday, the index next faces the 14 October low near 51,400. Beneath that lie the early-October lows around 51,000, which formed the foundation for the advance that began on 1 October.

Bias: A short bias remains appropriate while closing levels stay capped by the 50-day EMA near 52,150. The early-October lows near 51,000 provide the first target, followed by the 200-day EMA near 50,800, a level not traded since 7 April. Around 57, the daily Stochastic Relative Strength Index (Stoch RSI) has fallen halfway from its late-October peak and continues to decline. If the index closes a day back above 52,150, Thursday's move becomes a single-session event, like Wednesday's, and the short position ends.

5-minute chart of the Dow Jones Industrial Average