US stocks were trading higher on Wednesday, supported by the midterm election results. Democratic gains raised hopes that the party could check President Donald Trump’s policy agenda. The decline in crude oil prices and bond yields from recent highs also supported market sentiment.
The S&P 500 surged 1.8%, heading for its best single-day gain in three months. The Dow Jones Industrial Average was up 1,300 points, or 2.5%, at their day’s highs, while the Nasdaq Composite gained 2.4%.
The Magnificent Seven stocks were among the top gainers, with Amazon rising 8%, while Apple and Microsoft advanced 6% each. Alphabet gained 5.7%, while Meta Platforms climbed 3.5%. The two exceptions were Elon Musk’s Tesla, which fell 2%, and Nvidia, which declined 1%.
Meanwhile, SpaceX shares sank 3%. Musk, a former top adviser to President Donald Trump, is among those who could face investigations by a Democratic-controlled Congress.
Democrats’ gains raise hopes of political gridlock
Democrats reportedly scored victories in Republican strongholds across the country, flipping at least seven Senate seats and winning House races in districts that Republicans had easily carried in 2024.
The Democratic gains could make the party a check on Trump’s policies. The president has enacted business-friendly tax cuts while also pursuing tariffs and a war in Iran that have added to inflationary pressures.
Investors initially viewed a Democratic wave as a potential setback for stocks, given the prospect of tighter regulatory scrutiny, particularly of high-growth technology and artificial intelligence companies. However, those concerns later gave way to support from falling bond yields and confidence that the US economy remains on solid footing.
Markets generally prefer a divided government, with control of Washington split between Republicans and Democrats. Such an arrangement is seen as reducing the risk of sweeping policy changes that could disrupt the economy.
Trump acknowledged that the Iran war had played a role in his party’s sweeping defeat in the midterm elections, as Democrats won control of both the House of Representatives and the Senate.
Oil prices fall as investors assess Iran war outlook
Meanwhile, oil prices fell in Wednesday’s trade, with Brent crude dropping by nearly $2 a barrel as investors awaited Washington’s next move in the US-Israeli war with Iran following the Republican Party’s loss of control of Congress in the midterm elections.
Iran’s Supreme Leader Mojtaba Khamenei said in a written statement that US hostility would persist regardless of which party was in power, Reuters reported.
US Treasury yields ease on expectations of fiscal restraint
US Treasuries strengthened, with the benchmark 10-year Treasury note yield falling 3 basis points to 4.917%. The 30-year bond yield declined 4 basis points to 5.289%, while the shorter-term two-year note yield edged down to 4.606%.
According to analysts, Treasuries stand to benefit if political gridlock limits further tax cuts and government spending, easing concerns about federal borrowing. Bond investors have been uneasy about the US fiscal trajectory, with the country’s debt load standing at around $40 trillion.
Disclaimer: We advise investors to check with certified experts before making any investment decisions.
