US stocks climb as Democrats win midterm control

US stock markets rallied on Wednesday, according to The Guardian, as investors digested the outcome of the midterm elections, in which Democrats took both the Senate and the House. The Dow Jones index climbed close to 3 per cent, its strongest session in more than a year. The tech-heavy Nasdaq and the S&P 500 each gained about 1.5 per cent by the close.

The rally reversed overnight losses in US stock futures. Many traders had expected a Democratic win to create uncertainty, but the reaction was more positive. Investors appeared to welcome the possibility that Donald Trump’s policies would face more limits in his final term.

Dollar and oil move lower

The US dollar weakened against the currencies of America’s major trading partners. It reached a one-month low on Wednesday, with the pound rising to its highest level since mid-September. The Swiss franc and the yen also gained against the dollar, as traders often move into those currencies during uncertain periods.

Bond markets also moved. Investors bought US Treasuries, which are seen as a safe place to park money during political gridlock. The yield on the 10-year Treasury bond fell to 4.918 per cent, while the two-year yield dropped to 4.597 per cent.

Oil prices fell sharply as traders weighed what the Democratic win could mean for the war in Iran. Brent crude, the global benchmark, went beneath the $100 level, a point it had not reached since early October. Gold rose by about 2.2 per cent, moving above $4,000 an ounce.

Concerns about AI companies

Technology shares were a mixed story. Futures had initially pointed to a sharp fall for the Nasdaq, driven by worries about AI firms. Analysts said a Democrat-led Congress could bring tighter scrutiny of the sector. One example cited was Gina Hinojosa, who won the Texas governor’s race on a platform that included a call for a halt to new datacentre construction.

Shares of Tesla and SpaceX also came under pressure. Kathleen Brooks, research director at XTB, said that Elon Musk is viewed as an opponent by most Democrats. Musk, the world’s richest person, had put $446m into the midterm campaigns, funding Republican-aligned groups. Brooks also said the scrutiny could raise doubts about a possible merger between Musk’s two companies.

Why the story matters

Analysts said the outcome could shape US policy over the next two years. Trump has governed largely through executive orders, which has led some observers to question how much Congress can change. Tai Hui, a market strategist at JP Morgan Asset Management, said Trump still has significant influence over markets through trade and tariffs, foreign policy and existing regulations.

European markets also rose in early trading. London’s FTSE 100 gained 0.2 per cent, Germany’s Dax was up almost 0.6 per cent, and Italy’s FTSE MiB jumped almost 1.4 per cent. Bank stocks and clean energy companies, which have been hit hard by Trump’s policies, were among the strongest gainers in Europe.

Trump credited himself for the rise in a social media post, saying the stock market had hit another record high. Markets remain sensitive to the political outlook, and analysts say the next few months will show whether the early reaction holds.

Frequently asked questions

Sources

• The Guardian: US stocks rise, dollar slides as investors digest Democrats’ midterm victories

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