The Dow posted its largest single-day gain in 18 months, the S&P 500 rose 1.6%, and the Nasdaq gained 1.4%. The semiconductor index fell 3% to a six-month low, with NVIDIA Corp (NASDAQ: NVDA) dropping 3.17%. Tesla Inc (NASDAQ: TSLA) fell 3.34%. New cloud provider CoreWeave Inc (NASDAQ: CRWV) dropped 10% to a record low since its IPO, memory stock Micron Technology Inc (NASDAQ: MU) fell 7%, optical communications company Coherent Corp (NYSE: COHR) declined 6%, and data center stock IREN Ltd (NASDAQ: IREN) plunged 11%. The 10-year US Treasury yield fell 7 basis points. Gold rose over 3%, silver gained nearly 5%. Bitcoin climbed 3%.
The US midterm election results came in, and risk assets staged a massive rebound. The Democrats unexpectedly swept both the Senate and the House, and the market interpreted the political landscape shift as a dual positive of reduced geopolitical risk and policy gridlock, driving stocks and bonds higher while oil suffered one of its worst single-day declines of the year. On Wednesday, the S&P 500 closed up 1.6%, and the Dow surged 3%, marking its largest single-day gain since April 2025. Apple Inc (NASDAQ: AAPL), Microsoft Corp (NASDAQ: MSFT), and Amazon.com Inc (NASDAQ: AMZN) each rose more than 5%, leading the tech giants higher.
However, divergence within the market was pronounced: AI infrastructure-related stocks were sold off, with chip stocks and data center operators plunging. Meanwhile, the market bet that Democratic governance would accelerate de-escalation of the Iran war, and Brent crude oil plummeted nearly 10% below $100, dragging US Treasury yields lower across the board, with the 10-year yield dropping to 4.89%, a two-month low. Bitcoin broke through the $80,000 mark, and gold rose over 3%.
Where the rally began
The core logic of this rally lies in the convergence of "uncertainty elimination" and "political gridlock as a positive." Jason Pride of Glenmede said: gridlock is good — historical experience shows that when no single party can push through legislation on its own, the market tends to perform better. The election results came in, and the uncertainty premium dissipated, driving the rebound. The voting results changed the direction of stock indices in the early hours of the 4th. The Democrats secured 52 Senate seats and also retook the House, marking the largest Democratic wave since 1993. Trump said he would absolutely accept the results. Around 11:30 PM New York time, stock index futures turned from negative to positive.
Ultimately, the Dow closed at 53,356.12 points, up 3.03% or 1,569.40 points, the highest close since September 4. The S&P 500 rose 1.58% to 7,688.62 points, and the Nasdaq gained 1.44% to 25,736.51 points. The Nasdaq 100 rebounded from its 200-day moving average. The S&P 500 staged a strong rebound, climbing back above its 100-day moving average but encountering resistance near its 50-day moving average. The sectors most sensitive to policy led the gains. Among financial stocks, JPMorgan Chase & Co (NYSE: JPM) rose 4.20%, Goldman Sachs Group Inc (NYSE: GS) gained 3.59%, and Morgan Stanley (NYSE: MS) rose 4.25%. Healthcare and consumer discretionary sectors also advanced, while defense stocks bucked the trend, falling on concerns that Democrats would tighten Pentagon budgets. JPMorgan trader Craig Cohen noted that since 1950, the S&P 500 has risen in every year following midterm elections, with an average gain of about 15%; the average returns over three, six, and twelve months were 5.4%, 11.4%, and 14.7%, respectively.
Internal divergence in the AI sector: hyperscalers benefit, data center operators hit hard
The election results' impact on the tech sector was not one-directional but triggered a significant internal rotation. Goldman Sachs data showed that Amazon.com Inc (NASDAQ: AMZN), Apple Inc (NASDAQ: AAPL), and Microsoft Corp (NASDAQ: MSFT) contributed 65% of the Nasdaq 100's gain that day. The Magnificent Seven index rose more than 3%, posting its best single-day performance since August.
The market logic is that Democrats made breakthroughs in major data center states like Texas and Georgia, where grassroots opposition to rapid data center expansion continues to build. If infrastructure expansion is hindered and computing power supply tightens, computing power prices could rise while capital expenditure pressure eases, which would actually help hyperscale cloud providers with existing infrastructure improve their earnings quality. Scott Chronert, head of US equity strategy at Citi, said: the AI trade will face some headwinds in this direction... once you change the pace of data center expansion, you start changing the fundamental trajectory of many suppliers. The broad AI stock basket fell about 5% on the day, while the S&P 500 excluding AI components rose more than 2%.
New cloud providers, optical communications, and data center-related stocks were heavily sold off. CoreWeave Inc (NASDAQ: CRWV) fell 9.90% to $48.42, a record low since its IPO; Oracle Corp (NYSE: ORCL) dropped 1.92%; Micron Technology Inc (NASDAQ: MU) fell 7.00%; NVIDIA Corp (NASDAQ: NVDA) declined 3.17%. Data center operator IREN Ltd (NASDAQ: IREN) fell 11%, Hut 8 Corp (NASDAQ: HUT) plunged 23%, and Applied Digital Corp (NASDAQ: APLD) and Core Scientific Inc (NASDAQ: CORZ) were also hit hard. The Philadelphia Semiconductor Index closed down 3.11% at 10,270.85 points, a six-month low. Tesla Inc (NASDAQ: TSLA) fell 3.34% on concerns about how Democratic-controlled state governments might treat Musk's companies.
Ulrike Hoffmann-Burchardi of UBS Global Wealth Management believes that stronger congressional oversight may not upend the entire AI investment cycle, as underlying demand remains solid. Kevin Boova, a top investment-grade credit trader at Goldman Sachs, also said that a slowdown in computing power expansion could lead to a significant supply-demand imbalance in computing resources, "which should be a major positive for those with existing infrastructure, namely hyperscalers."
Energy sector posts worst single-day performance of the year
The US energy sector recorded its worst single-day performance of the year on the 4th. Refiner Valero Energy Corp (NYSE: VLO) fell 5.78% to $365.26, with an intraday low of $347.25; Devon Energy Corp (NYSE: DVN) dropped 7.38%, Cenovus Energy Inc (NYSE: CVE) fell 7.64%, Kosmos Energy Ltd (NYSE: KOS) declined 12.93%, and Baytex Energy Corp (NYSE: BTE) fell 6.90%. The declines were concentrated in segments directly tied to oil prices. Goldman Sachs' US refiners basket fell sharply on the day, with upstream shale producers generally declining more than integrated oil companies. Energy was the only major sector with a significant decline that day, exceeding the modest pullback in technology.
Oil plunges 10%, Brent crude falls below $95
Crude oil was the hardest-hit asset in this election-driven market move. Brent crude plummeted nearly 10% in a single day below $100, and WTI crude fell about 8% to around $88 per barrel, both hitting two-month lows. The market interpreted the Democratic sweep as a political signal of de-escalation in the Iran war. US Vice President Vance explicitly attributed the Republican defeat to Middle East hostilities on social media, further reinforcing the de-escalation narrative. According to Bloomberg, bearish sentiment in the crude options market was pronounced, with put options at $85 and $83 strike prices for December-expiry WTI trading at about 1.6 times the volume of call options, while Brent crude call skew also declined, indicating increasingly firm conviction in downside oil prices. JPMorgan separately noted that the global oil market had already returned to oversupply in September and October — Middle East production recovery and increased output elsewhere exceeding weak demand — providing fundamental support for this repricing of geopolitical risk premium. US distillate inventories fell below 100 million barrels for the first time since 2003, with Midwest inventories at their lowest since November 2014, though diesel prices still fell alongside crude.
Oil slump lowers inflation expectations, US Treasuries see strong buying
The sharp crude decline directly transmitted to inflation expectations, with the 10-year US Treasury breakeven inflation rate falling to its lowest level since August, providing fundamental support for Treasuries. The 10-year Treasury yield fell 7 basis points to 4.89%, holding below the 5% threshold for consecutive sessions and marking its lowest close in two months. Analysts believe the bond market also benefited from another layer of political logic: Democratic control of Congress would constrain the Trump administration's room to expand fiscal deficits, compressing the supply premium embedded in long-end bonds. The US Treasury's quarterly refunding statement provided additional support — the Treasury announced it would maintain bill and bond auction sizes unchanged "for the next several quarters" and removed the word "at least" from previous language, which the market interpreted as implying possible future supply increases, though the near-term signal was neutral. Analysts said Friday's nonfarm payroll data is the key near-term catalyst, and if it exceeds expectations, it could trigger a major shift in the Fed's policy path.
Dollar weakens, gold and bitcoin rally together
The dollar suffered its largest single-day decline since early September, as long positions built around Trump's pro-growth, high-deficit agenda were unwound. The Bloomberg Dollar Spot Index fell 0.4%, the euro rose to $1.1229, and the pound rose to $1.3471. Gold weakened alongside the dollar, posting its largest single-day gain since August, with spot gold rising over 3% to above $4,063 per ounce. Bitcoin's trajectory was more volatile — it came under pressure in the early hours of election night on expectations of stricter crypto regulation, then rallied sharply as tech sector rotation accelerated, reclaiming the $80,000 mark with a daily gain of 3.1%. Ethereum's gain was even more pronounced, rising 5.6% in a single day to around $2,422.
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