US stock market soars after Democrats win mid-term elections; What does Democratic sweep means for US markets?

US stock market opened higher across the board, shrugging off all the concerns raised after the Democrats’ clean sweep in the US midterm elections. The US stock market futures plunged nearly 2% overnight on fears of policy instability in the country. However, as the initial uncertainty faded, the US stock market futures recovered all the losses and bounced back sharply in the pre-market opening hours.

US stock markets jump up to 2%

The Dow Jones surged the most, over 1200 points or 2%, on Wednesday; the S&P 500 and the NASDAQ 100 opened 1.5% higher. Besides this, the Asian stock markets also recouped all the major losses in the intraday session and closed in the green.

The tech majors like Amazon Inc (+3%), Microsoft Corporation (+2%), and Apple Inc (+1.6%) were among the major gainers on Wednesday after democrats swept the mid-term elections in both chambers. Besides the tech stocks, shares from Pharma, consumer, retail, and financial services also gained. The list includes Amgen (+5.2%), Home Depot (+3.1%), Johnson & Johnson (+2.6%), Nike (+2.5%), American Express (+2.3%), and McDonald's Corporation (+2.3%).

On the flip side, semiconductors plunged after initial reports indicated that democrats could intensify scrutiny on the AI spending spree. Consequently, shares of chip makers like Nvidia (-1.5%), Marvell Technology (-2.7%), Intel Corporation (-2.5%), Micron Technology (-1.3%), and Broadcom (-1.1%) were among the major losers on Wednesday.

At the stock-specific level, Advanced Micro Devices shares surged over 4% on Wednesday after the company released its quarterly earnings on Tuesday. Q3 revenue surged 45% YoY to $13.3 billion, with EPS of $2.09 per share. Investors turned optimistic after the company raised the revenue guidance for Q4 to $17 and forecast faster-than-expected revenue growth in 2027. Besides, the company also announced a $60 billion deal with Meta to supply AI chips over five years.

What does the clean sweep by Democrats mean for the US markets?

The US stock markets have reacted positively and in sharp contrast to street estimates after the Democrats won the mid-term elections in both chambers. The election results and the reaction in markets have taken many by surprise. Market analysts and participants anticipated that a clean sweep by the Democrats could be a big negative for AI stocks, as it would increase scrutiny over the euphoric rise in investments.

Market participants also anticipated that the legislative implications of the win could wind down the growth story of AI in the US amid the mounting debt problem.

On the other hand, the consumer, retail, and financial services sectors see this win as a positive outcome for the US economy. Democrats are expected to impose more restrictions on tax cuts and relentless government spending. Fiscal prudence is expected to bring more discipline to the US fiscal scenario, leading to more stability in managing the national debt. Consequently, US bond yields fell near two-month lows. The US 10Y yields fell to 4.91%, and US 02Y remained steady near 4.5%.

What happens to the Iran war now?

The US-Iran war stands at a crucial inflection point after the elections, after escalating for more than six months. President Trump’s erratic decisions have imposed restrictions on the flow of crude oil from the region. Crude oil prices have surged more than 70% since the war started and have cost the global economy billions in losses and induced inflation across major economies, including Europe, the US, and Asia.

With Democrats now controlling both houses, the legislative restrictions on federal spending on the war will increase, thereby altering Trump’s decision-making power. However, Iran’s supreme leader, Mojtaba Khamenei, cautioned against expecting a fundamental shift in Washington’s stance against Iran, keeping the uncertainty high.

Disclaimer: This article is purely for informational purposes and should not be considered investment advice from Upstox. Please consult with a financial advisor before making any investment decisions.