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Financial Markets 11/04 15:31
NEW YORK (AP) -- U.S. stocks soared Wednesday after President Donald Trump's
party lost its sole control of Washington in the midterm elections.
Stocks generally do well in the months following any midterm U.S. election,
regardless of who wins, and the S&P 500 jumped 1.6% for its best day in three
months. The Dow Jones Industrial Average rallied 1,569 points, or 3%, and the
Nasdaq composite climbed 1.4%.
Stocks of hospital owners and dollar stores serving low-income Americans
helped lead the widespread rally following the nationwide losses for
Republicans. Investors, meanwhile, see risks ahead for Trump's social-media
company, the artificial-intelligence industry and businesses owned by Elon
Musk, who donated heavily to Republicans.
The price for a barrel of Brent crude oil also tumbled below $95 and touched
its lowest level in two months. Vice President JD Vance blamed Republicans'
midterm losses on the war with Iran, which caused a spike in oil prices.
Strategists along Wall Street had been urging investors not to get swept up
in the election because it may not matter much for the broad market in the long
term. Prices for stocks depend more on where profits for companies and interest
rates are heading than on who controls what in Washington.
"Earnings trump elections," according to Brian Jacobsen, chief economic
strategist at Annex Wealth Management.
Still, Wall Street may have gotten a preferred political scenario as
Democrats are set to take control of both the Senate and the House of
Representatives. Wall Street generally prefers split control of Washington
because it lessens the risk of transformative changes to the economy.
Much remains impossible to predict, of course, and Trump retains executive
authority over key areas such as defense, foreign policy and in some instances
trade.
A downbeat forecast could be that "Trump is not now a lame duck, but an
angry duck" who might restart tensions over tariffs and NATO allies' levels of
military spending, said Carsten Brzeski, global chief of macro at ING Bank.
An optimistic view, Brzeski said, is that Trump becomes "a tame duck ...
that he will slow down any disruptive efforts and that he will put more focus
on trying to win the Nobel Peace Prize by ending the two big wars without big
disruption, and on trade, nothing happens but a few words."
All told, the S&P 500 rose 119.70 points to 7,688.62. The Dow Jones
Industrial Average rallied 1,569.40 to 53,356.12, and the Nasdaq composite
climbed 364.50 to 25,736.51. Here's a look at some of the moves that rippled
through financial markets:
Trump Media and Tesla sank
Trump's social-media company, Trump Media & Technology Group, was one of the
market's bigger losers, down 24.5%.
Since briefly touching a peak of $175 five years ago, it's dropped to $4.49.
Its main business is Truth Social, which is most well known for Trump's
postings on the platform.
Elon Musk's businesses also struggled. Tesla fell 3.3%, and SpaceX sank
3.8%. Musk, a former top Trump adviser, is among the possible targets for
investigations by a Democratic-controlled Congress.
AI companies in general are under pressure
Trump has been a big backer of the AI industry, and Democratic victories
could mean more regulation or restrictions. Concerns have grown across
political parties about AI in general.
Investors see Democratic wins in Texas in particular as possibly slowing the
further build out of AI data centers. AI-related stocks came into Election Day
already under pressure because of worries their prices had shot too high.
Nvidia, the chip company that quickly became the poster child of the frenzy
around AI-related stocks, sank 3.1% and was the heaviest weight on the S&P 500.
CoreWeave, a company that rents out access to AI chips to customers over the
cloud, dropped 9.9%.
Companies that have been spending heavily on AI chips held up better.
Alphabet rose 3.2%, for example. The parent company of Google had tumbled to
its worst loss ever last Thursday on worries that it was spending too much on
AI investments.
Military suppliers felt pressure
A Democratic-led Congress could push Trump to pull back on the war with Iran.
That hurt stocks of companies that make weapons and other equipment for the
U.S. military, including drops of 6.9% for Lockheed Martin, 4.5% for Northrop
Grumman and 2.6% for General Dynamics.
Oil prices tumbled, and green energy companies rose
The possibility of pressure to pull back on the war sent the price for a
barrel of Brent crude oil plunging 8.7% to $94.62. That in turn hurt stocks of
big oil companies, which had been rallying for much of the year. ExxonMobil
fell 4.6%, and ConocoPhillips dropped 5.2%.
Falling oil prices usually hurt stocks of renewable-energy companies because
they can lessen the incentive to switch to other energy sources. But Democratic
control of Congress could light the way for companies in the solar and wind
industries.
First Solar rose 4.6%, and Enphase Energy climbed 3.7%.
Healthcare stocks and dollar stores also rallied
A Democratic-led Congress could try to reverse some of the cuts to federal
healthcare and food assistance that Republicans approved in their "One Big
Beautiful Bill Act."
That helped stocks climb across the healthcare industry, including a 10.3%
rise for HCA Healthcare, which runs hospitals and ambulatory sites.
Retailers also benefited on hopes that Democrats may push policies to help
Americans who are struggling to keep up with the fast-rising cost of living.
Dollar Tree, which focuses in particular on lower-income Americans, rose 9.6%.
Bond yields tumbled
In the bond market, Treasury yields sank as oil prices dropped and took
pressure off inflation. The move could also be a signal that investors see less
risk of Washington piling more debt onto its already big mountain with the
coming end to one-party control.
Treasury yields had climbed through the summer and reached their highest
levels in decades because of worries about the U.S. government's big debt,
along with high inflation and other concerns. A Congress controlled by
Democrats could provide a check against more spending and cuts to taxes that
would widen Washington's deficit.
The yield on the 10-year Treasury dropped to 4.88% from 4.95% late Tuesday.
Stocks jumped in much of the world
Indexes climbed across most of the world. Stocks leaped 2% in Paris, 2.2% in
Shanghai and 1.8% in London. Japan's Nikkei 225 was an outlier and fell 1.4%.
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AP Writer Elaine Lai contributed to this report from Hong Kong, and McHugh
contributed from Frankfurt, Germany.
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