Markets spent Tuesday night bracing for a narrow Democratic win in the House. They got both chambers instead. Asia’s first reaction was nervous: Nasdaq 100 futures fell more than 2% and the dollar slipped.
By Wednesday’s close in New York, most of that fear had gone. The Dow rose 3%, the S&P 500 1.6%, and oil fell more than 8%. The weaker dollar was the move that stuck.
What happened
Democrats won majorities in both the House and the Senate, according to Associated Press projections, with some races still being counted. James Talarico beat Ken Paxton for a Texas Senate seat, and Annie Andrews won in South Carolina. President Trump accepted the result and congratulated Democrats: “I look forward to working with you for the good of our country.”
That leaves a divided government: a Republican president with a veto, and a Democratic Congress.
What moved
| Market | Move | Close |
|---|---|---|
| Dow Jones | +3.0% | 53,356 |
| S&P 500 | +1.6% | 7,689 |
| Nasdaq 100 | +0.9% | 28,437 |
| US 10-year yield | -5 bp | 4.90% |
| Dollar index | -0.4% | 101.4 |
| EUR/USD | +0.2% | 1.122 |
| GBP/USD | +0.4% | 1.346 |
| USD/JPY | -0.1% | 158.4 |
| WTI crude | -8.3% | $88.12 |
| Brent crude | -8.7% | $94.60 |
| Gold | about +3% | about $4,050 |
Wednesday 4 November, New York close. Gold is from Wednesday’s trading, not the close.
Why stocks turned around
For equity investors, gridlock is often good news. A president and a Congress from different parties rarely agree on big changes, so the policy risk drops. Justin Buell of Continuity Group called a divided government “welcome news for stock investors”.
Trump’s conciliatory tone helped too. Capital.com’s Daniela Hathorn said the recovery showed investors recognise that a change in congressional control “does not necessarily translate into an immediate change in economic policy.”
The AI split
Not all of tech joined in. Amazon, Microsoft and Apple rallied, but AI data-centre builders sank: Hut 8 fell 23%, Sterling Infrastructure 21% and CoreWeave 10%. Investors fear a Democratic Congress will scrutinise AI spending, and Texas’s new Democratic governor, Gina Hinojosa, has pledged a pause on new data centres there. That’s why the Nasdaq 100 lagged the Dow.
Why the dollar fell
Two things pushed the same way. A risk-on mood usually weighs on the dollar: “when we see risk-on across the board, that’s broadly dollar negative,” Erik Bregar of Silver Gold Bull told Reuters. And a divided government means less spending and less borrowing, which pulls yields lower. “A divided government just speaks to less fiscal spending than we’ve seen in the last few years,” said Wellington Management’s Brij Khurana.
The dollar index touched 101.21 during the day, its lowest since 30 September. Sterling reached a seven-week high above $1.35.
Oil: the biggest move of the day
Oil fell more than 8%, and Brent dropped below $100 for the first time in weeks. Vice President JD Vance blamed the Iran war, which has pushed up inflation, for the Republican losses, and there were signs of US-Iran diplomacy. Traders read both as a step towards an end to the conflict.
What to watch next
- The Bank of England, today. It’s expected to raise rates to deal with energy-driven inflation, but it may push back on bets for several more hikes next year. With sterling at a seven-week high, the tone of the statement matters for GBP/USD.
- The Fed in December. Markets price about an 81% chance of a rate rise of at least 25 basis points, according to CME FedWatch. Cheaper oil could cool that.
- Oil and Iran. Wednesday’s drop prices in a lot of good news. If the diplomacy stalls, oil could bounce as fast as it fell.
A note on trading days like this
Nights like Tuesday are when spreads widen and orders fill away from the price you saw. If you trade around big events, check what your broker charges when the market is moving, not only the headline spread on a quiet day. Our broker rankings compare all-in costs across the brokers we cover.
This is market commentary, not investment advice.
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