- The overnight scare turned into a rally. The Dow Jones Industrial Average rocketed 1,022 points, or 2%, just after Wednesday’s opening bell, while the S&P 500 and Nasdaq Composite each added 1.3%, as political risk eased after Democrats won control of both chambers of Congress. Nasdaq-100 futures had earlier hit 27,615.75, their lowest since July 30, before climbing 929.75 points off that low.
- Megacap tech led the way. Apple rose 6%, Amazon 7%, Alphabet 5%, Microsoft 6% and Meta Platforms 2% in morning trading, breaking away from the broader AI trade. The two Magnificent Seven exceptions were Elon Musk’s Tesla, down 2%, and Nvidia, down 1%.
- AI infrastructure was the loser. Semiconductors fell 1%, as measured by the iShares Semiconductor ETF (SOXX), and neocloud stocks dropped 6%, according to the Roundhill Neocloud ETF (NCLD), as investors dumped the companies most exposed to greater scrutiny from a left-leaning Congress. CoreWeave dropped more than 7% and Nebius more than 4%.
- Defensive and policy winners rallied too. The State Street Consumer Staples Select Sector SPDR ETF (XLP) hit a fresh all-time high, up more than 2% and about 17% for the year, while renewables such as First Solar, Plug Power and Sunrun and health care names such as HCA and Molina rose in premarket trading. Trump Media fell 11% before the bell.
What Happened?
US stocks surged at the start of Wednesday’s session, reversing an overnight sell-off in futures that followed projections of a Democratic sweep of the House and Senate in Tuesday’s midterm elections. The Dow gained 1,022 points shortly after the open, and the S&P 500 and Nasdaq each rose 1.3%. Gains were concentrated in megacap technology and consumer staples, with Dollar Tree, Constellation Brands, Estee Lauder, Dollar General and Conagra Brands among the leaders in XLP. Precious metals also rose, with spot gold up 2.93% to $4,043.45 an ounce early in the day, and the dollar index slipped 0.39%.
Why It Matters?
The rally shows markets were more afraid of uncertainty than of the outcome itself: once a clear result was in, investors treated divided government as a check on policy rather than a threat. Edward Jones strategist Angelo Kourkafas had said the results could act as a “clearing event,” with any election-driven volatility a possible opportunity for long-term investors. The split under the surface matters, though. Money rotated into cash-rich megacaps and defensives while data center plays, which face a Democratic governor in Texas and ballot rejections of new data centers, kept falling, signaling that the AI trade is now being priced on political as well as spending risk.
What’s Next?
Investors will watch whether megacaps can keep decoupling from the AI infrastructure group, and whether the neocloud sell-off deepens as data center policy takes shape at the state level. Macro data remain a driver as well: ADP said private employers added 86,000 jobs in October, slightly ahead of the 75,000 estimate, ahead of Friday’s government payrolls report. History offers some comfort, with a CNBC analysis showing the S&P 500 has risen in the year after each of the last 11 midterms.
Affected Tickers and Coins: DIA, SPY, QQQ, AAPL, AMZN, MSFT, CRWV, NBIS, XLP, DJT
