The correction is in its final phase, and now is the right time to buy, say Wall Street analysts

U.S. stocks just had their worst day since April 2025, and the Nasdaq is in correction territory for the second time in a year. The market erased previous declines every time within a few months. But this time, the very narrative underpinning the entire rally is at stake.

The third major shock in eight months

2026 keeps teaching investors the same lesson. In March, the war with Iran and oil at 108 dollars sent the Nasdaq into correction territory, while the S&P 500 closed at 6 477 points. In June came the chip shock: Broadcom’s weaker outlook $AVGO sent the semiconductor index down 10 % in a day, wiping 1,3 trillion dollars off chipmakers’ value. In both cases, the market was back at record highs within a few months, most recently on October 6.

Thursday, November 5, fits the pattern in scale, but not in cause. The S&P 500 lost 4,4 %, the Nasdaq Composite 5,5 %, and the Dow Jones fell 1 833 points. Given that the index closed Friday at 7 377 points, even after this sell-off it is roughly 14 % higher than during the March correction. And anyone who remembers spring 2025 knows that even the tariff shock back then did not break the market: it returned to a record from its April low in 89 trading days, the fastest recovery in history after a decline of more than 15 %.

Under the surface, the damage is worse than the index suggests

Thursday’s numbers look dramatic, but the details reveal the market’s true condition. The technology sector lost 7,3 %, the only sector to underperform the index, yet all 11 sectors ended in the red. More than a third of S&P 500 companies—174 stocks, to be exact—are trading at least 20 % below their yearly highs. They include Intel, Oracle, Micron, Caterpillar, Coinbase, as well as Alphabet and Nvidia $NVDA, which fell 9,3 % in a single day, erasing all of its gains for the year.

Friday brought a rebound, but it failed to convince anyone. The S&P 500 gained 0,3 %, the Nasdaq 1,1 %, Nvidia 2,5 %, and Micron just under 4 %. The major indexes ended the week down 2,7 %.

“Technology stocks are rebounding after two days of one of the most aggressive sell-offs in a long time, but the bounce is very hesitant and tepid, with little meaningful chasing of prices higher.”

Adam Crisafulli, head of research firm Vital Knowledge, in a Friday note to investors

Why strategists see a bottom, not the start of a crisis

Wall Street’s most closely watched voices agree on one thing: Thursday was not the start of something new, but the culmination of a correction that has been underway since June. Mike Wilson of Morgan Stanley $MS has been making this case since October, pointing to the market’s breadth. While a handful of giants kept the main index close to its record, around 60 % of stocks in the Russell 3000 had already fallen more than 20 % since June. In his view, the index is simply catching up with what the average stock went through long ago.

“In summary, we believe the correction that began in June is now in its final phase, and much of the damage beneath the surface has already been done.”

Mike Wilson, chief U.S. equity strategist at Morgan Stanley, in a late-October note to clients

Wilson’s view on where relief will come from is also interesting. He does not expect rapid rate cuts from the Fed under Kevin Warsh. But he says liquidity will come from the U.S. Treasury, which plans to spend some of its cash reserves by year-end, reducing them from about 1,05 trillion to 850 billion dollars. According to Morgan Stanley, some of the money the government injects into the economy will also be reflected in asset prices.

Ed Yardeni of Yardeni Research, meanwhile, points out that data centers will continue to be built, just more slowly. He sees political opposition, power shortages, and more expensive financing as speed bumps, not a wall.

“Data centers will be built, albeit at a slower pace. Speed bumps should keep the AI boom from accelerating too quickly and crashing at the next turn.”

Ed Yardeni, president of Yardeni Research, in a Friday note to clients

Targets banks have not changed after the sell-off

Not one of the major strategists lowered their forecast after Thursday. The average year-end target among strategists tracked by Bloomberg remains at 7 973 points. Jonathan Golub of Seaport Global has the highest target, at 8 200 points, and called himself an unequivocal buyer after the elections. Wilson stands by 8 000, Yardeni by 7 900, while the most cautious, Ohsung Kwon of Wells Fargo $WFC, has a target of 7 700 points. Even the lowest estimate therefore implies a gain of more than 4 % from Friday’s close, while the average points to roughly 8 %.

The calendar is also helping the bulls. Since 1950, U.S. stocks have risen in the six and twelve months following every midterm election, without exception, and Morgan Stanley says large companies gained around 15 % on average in the six months after elections. That is why many banks were already advising clients in October to keep some cash on hand for the post-election period.

How this sell-off differs from the previous ones

March and June had one thing in common: they were external shocks that did not touch the AI narrative. The war ended with a ceasefire, and Broadcom was one disappointment in an otherwise record earnings season. This time, the blow is aimed directly at the foundations. Democrats won elections in part by opposing data centers, and Texas’s new governor, Gina Hinojosa, wants to halt new permits until the state adopts regulations. According to Yardeni Research, Texas accounts for nearly 30 % of capacity planned for 2028.

That is exactly what worries Kwon of Wells Fargo. Chips and AI infrastructure will remain under pressure, he says, and the semiconductor index is already more than a third below its June high. For the S&P 500 to rise significantly, the rest of the market would have to join in, and so far it has not shown the strength to do so. Paradoxically, companies such as Alphabet $GOOG or Amazon $AMZN could help the market, Kwon says, if they scaled back their massive investment plans.

That is the difference worth watching. Investors bought the previous two sell-offs because the AI narrative remained intact. This time, they are selling because they doubt the narrative itself. Strategists believe this is just another speed bump. The first answer to whether they are right will come from chip stocks: until they find a bottom, every index rebound will look like Friday’s.