Dow jumps after Democrats take Congress

U.S. stocks surged on Wednesday as Wall Street reacted to the midterm election results in which President Donald Trump’s party lost its sole control of Washington. The market rally reflected a preference for a check on executive power rather than a fear of political gridlock. As of 10 a.m. Eastern time, the Dow Jones Industrial Average climbed 1,112 points, or 2.1%, while the S&P 500 rose 1.8% toward its best day in three months. The Nasdaq composite gained 2.4% during the session.

Wall Street strategists had advised investors to focus on corporate profits and interest rates rather than election outcomes. Brian Jacobsen, chief economic strategist at Annex Wealth Management, noted that earnings matter more than who controls the government. However, the current political scenario appears to align with a preferred market condition. Democrats are set to take control of both the Senate and the House of Representatives, creating a split government that may limit the risk of transformative economic changes.

Solar power stocks led the advance as investors positioned for potential policy support from a Democratic-controlled Congress. First Solar shares jumped 11.1%, and Enphase Energy climbed 11.6%. In contrast, companies associated with the president and his allies faced selling pressure. Trump Media & Technology Group dropped 9.5%, extending its year-to-date loss to 55.1%. Elon Musk’s businesses also struggled, with Tesla falling 3.6% and SpaceX sinking 3%.

The artificial intelligence sector faced headwinds due to concerns over increased regulation and slower infrastructure buildout. Investors reacted to Democratic victories in Texas, which may delay the expansion of AI data centers. Nvidia, a key player in the AI chip market, slipped 0.5% after an earlier decline of 2.8%. CoreWeave, which rents access to AI chips, fell 6.8%. Advanced Micro Devices performed better, rising 3.4% after reporting quarterly profits that exceeded analyst expectations.

Bond yields eased as investors priced in a lower probability of further deficit expansion. A Democratic Congress could act as a check on government spending and tax cuts. The yield on the 10-year Treasury fell to 4.92% from 4.95% late Tuesday. This movement follows a summer in which Treasury yields reached their highest levels in decades due to concerns over the U.S. debt load and inflation.

Carsten Brzeski, global chief of macro at ING Bank, offered two scenarios for the president’s remaining term. He described a downbeat view in which Trump becomes an angry duck, potentially restarting tensions over tariffs and NATO defense spending. His optimistic view posits a tame duck that slows disruptive efforts and focuses on ending wars and stabilizing trade.

Global markets generally followed the U.S. rally. Stock indexes in Paris and Shanghai each climbed 2.2%, while London’s index rose 1.8%. Japan’s Nikkei 225 was an outlier, falling 1.4%. Oil prices provided a boost to global equities, with Brent crude dropping 2.9% to $100.63 amid uncertainty about the impact of the war with Iran on the energy industry.