Post-election snapshots

Initial market reactions to news events don’t always hold, but it’s still worth reviewing some of the more notable moves that occurred on Wednesday after the midterm elections.

Stocks rallied energetically at the index level—the S&P 500’s (SPX) 1.6% gain was its third-biggest jump the day after a midterm election since 1958. (The second-biggest was the 2.1% rally on November 7, 2018 in President Trump’s first term, while the largest was the 3.9% surge on November 3, 1982 during Ronald Reagan’s first term.) The SPX closed at a three-day high, filling its October 29-30 down gap:

Nine of the SPX’s 11 sectors gained ground, but performance was mixed in a few key industries.

The AI hyperscalers that helped drag the market lower in recent weeks played a significant role in Wednesday’s rally. The two-strongest SPX sectors were consumer disretionary and communication services, the former getting a big boost from Amazon (AMZN) and the latter benefiting from rallies in Meta (META) and Alphabet (GOOGL). Fellow hyperscaler Microsoft (MSFT) also chipped in with a 6%-plus gain.

But the AI trade wasn’t uniformily bullish. Concerns that Tuesday’s “blue wave” could slow data center construction appeared to weigh on semiconductor and electronic equipment stocks in the tech sector, as well as the construction & engineering and electrical equipment segments within industrials—which was the only sector besides energy to decline on the day. (Morgan Stanley & Co. strategists noted that the Democratic party’s sweep could result in “incrementally negative AI sentiment on greater expectations for data center restrictions.”¹)

There were also notable moves outside the stock market. US Treasury yields and the dollar fell, while precious metals jumped—December gold futures (GCZ6) gained more than 3% and climbed back above $4,000 in the process. Ether (+6.6%) paced the day’s crypto rally.

Meanwhile, US oil prices tumbled more than 8%, with December WTI futures falling to a nearly one-month low near $88 as President Trump struck a more conciliatory tone toward Iran and traders possibly saw a Democrat-led Congress as a potential check on the conflict:

While Morgan Stanley & Co. strategists acknowledge the uncertainty resulting from a change in congressional control can act as a headwind to stocks at the index level, they also point out that since 1982, large-cap stocks have gained roughly 15% on a cap-weighted basis and 16% on an equal-weighted basis in the six months after midterms.²

Regardless, it will take time to discover the results’ longer-term implications, especially for specific industries. Markets “reacted” to the elections on Wednesday, but only time will tell if those moves were signals or sidebars.

Market mover update: MercadoLibre (MELI) rallied 4.7% on Wednesday, extending its bounce since it hit a four-month low on October 26 after the Brazilian presidential election (see “Election makes impression on markets”).

Today’s numbers include (all times ET): job cuts (5:30 a.m.), jobless claims (8:30 a.m.), Productivity and Labor Costs (8:30 a.m.), EIA Natural Gas Report (10:30 a.m.).

Today’s earnings include: Airbnb (ABNB), Kimberly Clark (KMB), Lyft (LYFT), Mattel (MAT), MP Materials (MP), Cloudflare (NET), Ralph Lauren (RL), Rockwell Automation (ROK), Tapestry (TPR), Verisk Analytics (VRSK).

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^1,2 MorganStanley.com. Midterm Election Results: Decisive for Democrats. 11/4/26.