Data-centre backlash wipes out Dow Jones Industrial Average’s midterm rally

• DJIA hits its lowest since October 14. A backlash against data centres wipes out Wednesday's rally.
• About a third of the points lost comes from Goldman Sachs and Caterpillar, versus about 6% from Nvidia.
• 65K is the October payrolls forecast, up from September's 29K; the report arrives Friday at 13:30 GMT.

The Dow Jones Industrial Average trades just above 51,500. That leaves it below Tuesday's close and at its weakest since October 14. After recording its best 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 falling. Coca-Cola (KO) is the exception.

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

Three times Nvidia's drag came from Goldman Sachs

Share price, rather than company size, determines a constituent's influence on the price-weighted Dow. At about $870 per share, Goldman Sachs (GS) represents a tenth of the index. Its roughly 6% decline contributes around a fifth of the points lost. By contrast, Nvidia (NVDA), priced at about $180, has a 2% weighting; its 9% fall contributes about 6% of the decline. Despite falling more than the bank, the $4 trillion company exerted only about a third of its downward pull on the Dow.

The next-largest drag is Caterpillar (CAT), the constituent with the most direct exposure to the expansion now called into question by the election. In third-quarter results released on October 29, its power generation sales increased 30% to $3.42 billion, largely from turbines and large engines for data centres. Apple, Amazon, Alphabet, Microsoft and Nvidia, five of the biggest US technology companies, are all Dow members. Yet their combined contribution to the fall is less than a fifth. Banks, industrials, healthcare and the remaining constituents account for the other four fifths.

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

March 25 bill marked the push for a construction halt

On March 25, Senator Bernie Sanders and Representative Alexandria Ocasio-Cortez introduced the AI Data Center Moratorium Act. The bill would suspend new construction until Congress enacts artificial intelligence (AI) regulation. Following the results, Sanders renewed that demand on Wednesday. By then, lawmakers across at least 11 states had put forward their own proposals for 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. A major share of planned capacity in Texas, Georgia and Ohio may encounter regulatory obstacles, Fitch said. UBS estimates that construction suspensions could jeopardise about 30% of capacity scheduled for 2028. During the session, Alphabet (GOOGL) unveiled a $17 billion data centre in Wyoming. Its shares nevertheless fell alongside the rest of the market.

65K payrolls forecast meets a December move already priced in

Markets paid no attention to Thursday's positive economic releases. For the week to October 31, initial jobless claims declined to 189K, versus a forecast of 196K, equalling the lowest figure since 1969. Productivity in the third quarter rose 3.6%, exceeding expectations of 2.5%. Unit labour costs dropped 0.7%, their first decline since the second quarter of 2025. Even so, the 10-year Treasury yield moved lower to about 4.85%.

Inflation pressures are 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 biggest risk, adding that AI expansion has increased demand. He also noted that data centres employ too few workers to create natural constituencies in their host communities. On October 28, the Fed left rates at 3.75%-4.00%. Ahead of the session, futures put the probability of an increase at the December 9 meeting at close to 80%.

Friday's October payrolls release is scheduled for 13:30 GMT. The forecast is 65K, following 29K in September, with unemployment expected to remain at 4.2% and average hourly earnings at 0.3% MoM. A reading close to expectations would keep the December increase in play, layering higher borrowing costs onto Thursday's concerns about slower construction. A weaker result would reduce the likelihood of an increase but substitute fears of 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 December 9. Futures have already priced the meeting before either report is released.

200-day average moves within reach

Resistance: Near 52,150, the 50-day Exponential Moving Average (EMA) is the initial hurdle. Wednesday delivered the first close above it since October 29, but that break held for only one session. Further resistance lies at the late-October high near 52,900, followed by Thursday's pre-open peak just below 53,800. That was where the rally following the results ran out of momentum.

Support: The first reference is Thursday's low just below 51,500, the weakest level since October 14. Next comes the October 14 low near 51,400. Beneath it, early-October lows around 51,000 form the foundation of the advance that began on October 1.

Bias: Maintain a short bias while closes remain capped by the 50-day EMA near 52,150. Target the early-October lows near 51,000 first, then the 200-day EMA near 50,800. The index has not traded at the latter since April 7. Near 57, the daily Stochastic Relative Strength Index (Stoch RSI) has moved halfway down from its late-October peak and continues to decline. A daily close above 52,150 would end the short position and leave Thursday as a one-day move, just as Wednesday was.

5-minute chart: Dow Jones Industrial Average