US stocks rallied sharply on Wednesday.
A sweeping Democratic victory in the midterm elections fueled expectations that the Iran war could soon come to an end, sending oil prices lower.
Tech giants also surged as investors bet that a Democrat-controlled Congress would force these companies to cut the AI spending that the market has long been calling to rein in.
Amazon and Microsoft each rose more than 6%, driving the Magnificent Seven index up 2.2%.
The Dow Jones Industrial Average posted its best single-day performance since April 2025.
The S&P 500 gained 1.6%, rising for a second consecutive session, led by consumer discretionary and financial stocks.
The Russell 2000 climbed 1.6%, while the Cboe Volatility Index hovered around 17.
The S&P 500 Energy Index fell 4.8%, its worst single-day performance since April 2025, tracking crude oil prices lower.
Investors' expectation is that a Democratic sweep of Congress could prompt a quicker end to the Iran conflict that has disrupted global energy markets.
"From a macro perspective, investors are happy the midterms are over and the market has climbed over its wall of worry," said Joe Gilbert, portfolio manager at Integrity Asset Management.
Investors are now concerned that AI infrastructure buildout will face stricter regulatory scrutiny under a Democrat-controlled Congress.
"For investors, data center policy is rising on the risk list," said Darrell Cronk of Wells Fargo Investment Institute.
Tesla and SpaceX declined as investors assessed the potential impact of the midterm results on companies owned by Republican donor Musk.
Data center-related stocks such as CoreWeave and Iren also moved lower.
At the close, the S&P 500 rose 1.6% to 7,688.62 points; the Dow Jones Industrial Average gained 3% to 53,356.12 points; the Nasdaq Composite advanced 1.4% to 25,736.51 points; the Nasdaq 100 rose 0.9% to 28,437.17 points; and the Russell 2000 climbed 1.6% to 2,856.95 points.
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